Bureau of Consumer Financial Protection. Part III. 12 CFR Part 1005 Electronic Fund Transfers (Regulation E); Final Rule

Transcription

1 Vol. 78 Wednesday, No. 99 May 22, 2013 Part III Bureau of Consumer Financial Protection 12 CFR Part 1005 Electronic Fund Transfers (Regulation E); Final Rule VerDate Mar<15> :55 May 21, 2013 Jkt PO Frm Fmt 4717 Sfmt 4717 E:\FR\FM\22MYR2.SGM 22MYR2

2 30662 Federal Register / Vol. 78, No. 99 / Wednesday, May 22, 2013 / Rules and Regulations BUREAU OF CONSUMER FINANCIAL PROTECTION 12 CFR Part 1005 [Docket No. CFPB ] RIN 3170 AA33 Electronic Fund Transfers (Regulation E) AGENCY: Bureau of Consumer Financial Protection. ACTION: Final rule; official interpretation. SUMMARY: The Bureau of Consumer Financial Protection (Bureau) is amending its regulation which implements the Electronic Fund Transfer Act, and the official interpretation to the regulation. This final rule (the 2013 Final Rule) modifies the final rules issued by the Bureau in February, July, and August 2012 (collectively the 2012 Final Rule) that implement section 1073 of the Dodd- Frank Wall Street Reform and Consumer Protection Act regarding remittance transfers. The amendments address three specific issues. First, the 2013 Final Rule modifies the 2012 Final Rule to make optional, in certain circumstances, the requirement to disclose fees imposed by a designated recipient s institution. Second and relatedly, the 2013 Final Rule also makes optional the requirement to disclose taxes collected by a person other than the remittance transfer provider. In place of these two former requirements, the 2013 Final Rule requires disclaimers to be added to the rule s disclosures indicating that the recipient may receive less than the disclosed total due to the fees and taxes for which disclosure is now optional. Finally, the 2013 Final Rule revises the error resolution provisions that apply when a remittance transfer is not delivered to a designated recipient because the sender provided incorrect or insufficient information, and, in particular, when a sender provides an incorrect account number or recipient institution identifier that results in the transferred funds being deposited in the wrong account. DATES: This rule is effective October 28, The effective date of the rules published February 7, 2012 (77 FR 6194), July 10, 2012 (77 FR 40459), and August 20, 2012 (77 FR 50244), which were delayed on January 29, 2013 (78 FR 6025), is October 28, FOR FURTHER INFORMATION CONTACT: Eric Goldberg, Ebunoluwa Taiwo or Lauren Weldon, Counsels; Division of Research, Markets & Regulations, Bureau of Consumer Financial Protection, 1700 G Street NW., Washington, DC 20552, at (202) or CFPB_Remittance Rule@consumerfinance.gov. Please also visit the following Web site for additional information: final-remittance-rule-amendmentregulation-e/. SUPPLEMENTARY INFORMATION: I. Summary of the Final Rule This final rule (the 2013 Final Rule) revises the amendments to Regulation E published on February 7, 2012 (77 FR 6194) (February Final Rule) 1 and August 20, 2012 (77 FR 50244) (August Final Rule and collectively with the February Final Rule, the 2012 Final Rule). The 2012 Final Rule, summarized below, implements section 1073 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act), which creates a comprehensive new system of consumer protections for remittance transfers sent by consumers in the United States to individuals and businesses in foreign countries. The 2013 Final Rule amends the 2012 Final Rule by addressing three specific issues. First, the 2013 Final Rule modifies the 2012 Final Rule to make optional, in certain circumstances, the requirement to disclose fees imposed by a designated recipient s institution for transfers to the designated recipient s account. Second and relatedly, the 2013 Final Rule also makes optional the requirement to disclose taxes collected by a person other than the remittance transfer provider. In place of these two former requirements, the 2013 Final Rule requires providers to include disclaimers on the disclosure forms provided to senders of remittance transfers indicating that the recipient may receive less than the disclosed total due to certain recipient institution fees and taxes collected by a person other than the provider. In addition, the 2013 Final Rule permits providers to disclose these fees and taxes, or a reasonable estimate of these figures, as part of the new required disclaimer. The 2013 Final Rule also creates an exception from the 2012 Final Rule s error provisions for certain situations in which a sender provides an incorrect account number or recipient institution identifier and that mistake results in the transfer being deposited in the account of someone other than the designated recipient. For this exception to apply, a remittance transfer provider must satisfy 1 The Bureau published a technical correction to the February Final Rule on July 10, FR For simplicity, that technical correction is incorporated into the term February Final Rule. VerDate Mar<15> :55 May 21, 2013 Jkt PO Frm Fmt 4701 Sfmt 4700 E:\FR\FM\22MYR2.SGM 22MYR2 a number of conditions including providing notice to the sender prior to the transfer that the transfer amount could be lost, implementing reasonable verification measures to verify the accuracy of a recipient institution identifier, and making reasonable efforts to retrieve the mis-deposited funds. The 2013 Final Rule also streamlines error resolution procedures in other situations where a sender s provision of incorrect or incomplete information results in an error under the rule. Finally, the 2013 Final Rule will go into effect on October 28, II. Background A. Section 1073 of the Dodd-Frank Act Section 1073 of the Dodd-Frank Act amended the Electronic Fund Transfer Act (EFTA) to create a new comprehensive consumer protection regime for remittance transfers sent by consumers in the United States to individuals and businesses in foreign countries. For covered transactions sent by remittance transfer providers, section 1073 creates a new EFTA section 919, and generally requires: (i) The provision of disclosures prior to and at the time of payment by the sender for the transfer; (ii) cancellation and refund rights; (iii) the investigation and remedy of errors by providers; and (iv) liability standards for providers for the acts of their agents. B. Types of Remittance Transfers As discussed in more detail in the February Final Rule, consumers can choose among several methods of transferring money to foreign countries. The various methods of remittance transfers can generally be categorized as involving either closed network or open network systems, although hybrids between open and closed networks also exist. Consistent with EFTA section 919, the 2013 Final Rule generally applies to all remittance transfer providers, whether transfers are sent through closed network or open network systems, or some hybrid of the two. Closed Networks and Money Transmitters In a closed network, a principal provider offers a service entirely through its own operations, or through a network of agents or other partners that help collect funds in the United States and disburse them abroad. Through the provider s own contractual arrangements with those agents or other partners, or through the contractual relationships owned by the provider s business partner, the principal provider can exercise some control over the

3 Federal Register / Vol. 78, No. 99 / Wednesday, May 22, 2013 / Rules and Regulations transfer from end-to-end, including over fees and other terms of service. In general, closed networks can be used to send transfers that can be received in a variety of forms. But, they are most frequently used to send transfers that are not received in accounts held by depository institutions and credit unions. Additionally, closed networks are most frequently used by non-depository institutions called money transmitters, though depository institutions and credit unions may also provide (or operate as part of) closed networks. Similarly, the Bureau believes that many money transmitters operate exclusively or primarily through closed network systems. Open Networks and Wire Transfers In an open network, no single provider has control over or relationships with all of the participants that may collect funds in the United States or disburse funds abroad. Funds may pass from sending institutions through intermediary institutions to recipient institutions, any of which may deduct fees from the principal amount or set the exchange rate that applies to the transfer, depending on the circumstances. Institutions involved in open network transfers may learn about each other s practices regarding fees or other matters through any direct contractual or other relationships that do exist, through experience in sending wire transfers over time, through reference materials, or through information provided by the consumer. However, at least until the time of the February Final Rule, in open networks, there has not generally been a uniform global method for or practice of communication by all intermediary and recipient institutions with originating entities regarding the fees and exchange rates that intermediary or recipient institutions might apply to transfers. Unlike closed networks, open networks are typically used to send funds to accounts at depository institutions or credit unions. Though they may be used by money transmitters, open networks are primarily used by depository institutions, credit unions and brokerdealers for sending money abroad. The most common form of open network remittance transfer is a wire transfer, a certain type of electronically transmitted order that directs a receiving institution to pay an identified beneficiary. Unlike closed network transactions, which generally can only be sent to agents or other entities that have signed on to work with the specific provider in question, wire transfers can reach most banks (or other institutions) worldwide through national payment systems that are connected through correspondent and other intermediary bank relationships. Information on the volume of remittance transfers sent via certain methods is very limited. However, the Bureau believes that closed network transactions by money transmitters and wire transfers sent by depository institutions and credit unions make up the great majority of the remittance transfer market. Furthermore, the Bureau believes that, collectively, money transmitters send far more remittance transfers each year than depository institutions and credit unions combined. III. Summary of the Rulemaking Process The Bureau published three rules in 2012 to implement section 1073 of the Dodd-Frank Act. The Bureau then published a proposal on December 31, 2012, which would have modified those published rules in three distinct areas. 77 FR (the December Proposal). These three final rules and the December Proposal are summarized below. A. The 2012 Final Rule On May 31, 2011, the Board of Governors for the Federal Reserve System (Board) first proposed to amend Regulation E to implement the remittance transfer provisions in section 1073 of the Dodd-Frank Act. See 76 FR (May 23, 2011). Authority to implement the new Dodd-Frank Act provisions amending the EFTA transferred from the Board to the Bureau on July 21, See 12 U.S.C. 5581(a)(1); 12 U.S.C. 5481(12) (defining enumerated consumer laws to include the EFTA). On February 7, 2012, the Bureau finalized the Board s proposal in the February Final Rule. On August 20, 2012, the Bureau published the August Final Rule adopting a safe harbor for determining which persons are not remittance transfer providers subject to the February Final Rule because they do not provide remittance transfers in the normal course of business, and modifying several aspects of the February Final Rule regarding remittance transfers that are scheduled before the date of transfer. The 2012 Final Rule had an effective date of February 7, The 2012 Final Rule adopts provisions that govern certain electronic transfers of funds sent by consumers in 2 On January 29, 2013, the Bureau temporarily delayed the February 7, 2013 effective date (Temporary Delay Rule). VerDate Mar<15> :55 May 21, 2013 Jkt PO Frm Fmt 4701 Sfmt 4700 E:\FR\FM\22MYR2.SGM 22MYR2 the United States to designated recipients in other countries and, for covered transactions, imposes a number of requirements on remittance transfer providers. In particular, the 2012 Final Rule implements disclosure requirements in EFTA sections 919(a)(2)(A) and (B). The 2012 Final Rule includes provisions that generally require a provider to provide to a sender a written pre-payment disclosure containing detailed information about the transfer requested by the sender, specifically including the exchange rate, applicable fees and taxes, and the amount to be received by the designated recipient. In addition to the prepayment disclosure, pursuant to the 2012 Final Rule, the provider also must furnish to a sender a written receipt when payment is made for the transfer. The receipt must include the information provided on the prepayment disclosure, as well as additional information such as the date of availability of the funds, the designated recipient s contact information, and information regarding the sender s error resolution and cancellation rights. Though the 2012 Final Rule s provisions permit remittance transfer providers to provide estimates in three specific circumstances, the 2012 Final Rule generally requires that disclosures state the actual exchange rate that will apply to a remittance transfer and the actual amount that will be received by the designated recipient of a remittance transfer. One of the exceptions permitting estimates includes a temporary exception for certain transfers provided by insured institutions. Pursuant to this exception, if the remittance transfer provider is an insured depository institution or credit union, the transfer is sent from the sender s account with the institution, and the provider cannot determine exact amounts for reasons beyond its control, the provider can estimate the exchange rate, any fees imposed on the remittance transfer by a person other than the provider, and, in more limited circumstances, taxes imposed by a person other than the provider. The 2012 Final Rule also includes two permanent exceptions permitting estimates, one for transfers to certain countries and the other for transfers that are scheduled five or more business days before the date of transfer. As noted above, the EFTA, as amended by the Dodd-Frank Act, requires the disclosure of the amount to be received by the designated recipient. Because fees imposed and taxes collected on a remittance transfer by persons other than the remittance

4 30664 Federal Register / Vol. 78, No. 99 / Wednesday, May 22, 2013 / Rules and Regulations transfer provider can affect the amount received by the designated recipient, the 2012 Final Rule s provisions require that providers take such fees and taxes into account when calculating the disclosure of the amount to be received under (b)(1)(vii), and that such fees and taxes be disclosed under (b)(1)(vi). Comment 31(b)(1) ii to the 2012 Final Rule explains that a provider must disclose any fees and taxes imposed on the remittance transfer by a person other than the provider that specifically relate to the remittance transfer, including fees charged by a recipient institution or agent. Foreign taxes that must be disclosed include regional, provincial, state, or other local taxes, as well as taxes imposed by a country s central government. In the February Final Rule in response to comments received on the Board s proposal, the Bureau noted that commenters had argued that fees imposed and taxes collected on the remittance transfer by a person other than the remittance transfer provider may not be known at the time the sender authorizes the remittance transfer and that this lack of knowledge could result in the provider disclosing misleading information to the sender. The Bureau also acknowledged that smaller institutions might not have the resources to obtain or monitor information about foreign tax laws or fees charged by unrelated financial institutions and that providers might not know whether a recipient had agreed to pay such fees or how much the recipient may have agreed to pay. Nevertheless, the Bureau stated that the Dodd-Frank Act specifically requires providers to disclose the amount to be received, and that fees imposed and taxes collected on the remittance transfer by a person other than the provider are a necessary component of this amount. The Bureau further stated that it was necessary and proper to exercise its authority under EFTA sections 904(a) and (c) to adopt (b)(1)(vi) to require the itemized disclosure of fees and taxes imposed on the remittance transfer by persons other than the provider to help senders understand the calculation of the amount received, which would aid comparison shopping and the identification of errors, and thus effectuate the purposes of the EFTA. The 2012 Final Rule also implements EFTA sections 919(d) and (f), which direct the Bureau to promulgate error resolution standards and rules regarding appropriate cancellation and refund policies, as well as standards of liability for remittance transfer providers. The 2012 Final Rule thus defines in what constitutes an error with respect to a remittance transfer, as well as what remedies are available when an error occurs. Of relevance to the 2013 Final Rule, the 2012 Final Rule provides in (a)(1)(iii) and (a)(1)(iv) that, subject to specified exceptions, an error includes the failure to make available to a designated recipient the amount of currency stated in the disclosure provided to the sender, as well as the failure to make funds available to a designated recipient by the date of availability stated in the disclosure. Where the error is the result of the sender providing insufficient or incorrect information, (c)(2)(ii) in the 2012 Final Rule specifies the available remedies: The provider must either refund the funds provided by the sender in connection with the remittance transfer (or the amount appropriate to correct the error) or resend the transfer at no cost to the sender, except that the provider may collect third-party fees imposed for resending the transfer. If the transfer is resent, comment 33(c) 2 to the 2012 Final Rule explains that a request to resend is a request for a remittance transfer, and thus the provider must provide the disclosures required by Under (c)(2) of the 2012 Final Rule, even if the provider cannot retrieve the funds once they are sent, the provider still must provide the stated remedies if an error occurred. B. The December Proposal In the February Final Rule, the Bureau stated that it would continue to monitor implementation of the new statutory and regulatory requirements. The Bureau subsequently engaged in dialogue with both industry and consumer groups regarding implementation efforts and compliance concerns. Most frequently, industry participants expressed concern about the costs and compliance challenges to remittance transfer providers of: (1) The requirement to disclose certain fees imposed by recipient institutions on remittance transfers; (2) the requirement to disclose taxes imposed by a person other than the provider, including taxes charged by foreign regional, provincial, state, or other local governments; and (3) the requirement to treat as an error, and thus resend or refund a remittance transfer, where the failure to deliver a transfer to the designated recipient occurs because the sender provided an incorrect account number to the provider. As a result, the Bureau proposed to refine these specific aspects of the 2012 Final Rule in the December Proposal. VerDate Mar<15> :55 May 21, 2013 Jkt PO Frm Fmt 4701 Sfmt 4700 E:\FR\FM\22MYR2.SGM 22MYR2 First, the Bureau proposed to exercise its exception authority under section 904(c) of the EFTA to provide additional flexibility on how foreign taxes and recipient institution fees may be disclosed. If a remittance transfer provider did not have specific knowledge regarding variables that affect the amount of foreign taxes imposed on the transfer, the December Proposal would have permitted a provider to rely on a sender s representations regarding these variables, as permitted under the 2012 Final Rule. However, the December Proposal would have also permitted providers to estimate foreign taxes by disclosing the highest possible such tax that could be imposed with respect to any unknown variable. Similarly, if a provider did not have specific knowledge regarding variables that affect the amount of fees imposed on the remittance transfer by a recipient institution for receiving a remittance transfer in an account, the December Proposal would have permitted a provider to rely on a sender s representations regarding these variables. Separately, the December Proposal would have also permitted the provider to estimate a fee imposed on the remittance transfer by a recipient institution for receiving a transfer into an account by disclosing the highest possible fee with respect to any unknown variable, as determined based on either fee schedules made available by the recipient institution or information ascertained from prior transfers to the same recipient institution. If the provider could not obtain such fee schedules or information from prior transfers, the December Proposal would have allowed a provider to rely on other reasonable sources of information. Second, the Bureau proposed to exercise its exception authority under section 904(c) of the EFTA to eliminate the requirement to disclose foreign taxes at the regional, state, provincial and local level. Thus, under the December Proposal, a remittance transfer provider s obligation to disclose foreign taxes would have been limited to taxes imposed on the remittance transfer by a foreign country s central government. Because the proposed changes regarding recipient institution fees and taxes, taken together, could have resulted in inexact disclosures, the December Proposal also solicited comment on whether the existing requirement in the 2012 Final Rule to state that a disclosure is Estimated when estimates are provided under should be extended to scenarios where disclosures

5 Federal Register / Vol. 78, No. 99 / Wednesday, May 22, 2013 / Rules and Regulations are not exact due to the proposed revisions. Third, the December Proposal would have revised the error resolution provisions that apply when a sender provides incorrect or insufficient information to the remittance transfer provider, and, in particular, when a remittance transfer is not delivered to a designated recipient because the sender provided an incorrect account number to the provider and the incorrect account number results in the funds being deposited in the wrong account. Under the December Proposal, in these circumstances, where the provider could demonstrate that the sender provided the incorrect account number and the sender had notice that the sender could lose the transfer amount, the provider would not have been required to return or refund misdeposited funds that could not be recovered, provided that the provider had made reasonable efforts to attempt to recover the funds. The December Proposal also would have revised the existing remedy procedures in situations where a sender provided incorrect or insufficient information, other than an incorrect account number, to allow remittance transfer providers additional flexibility when resending funds at a new exchange rate. Under proposed (c)(3), providers would have been able to provide oral, streamlined disclosures and would not have been required to treat resends as entirely new remittance transfers. The Bureau also proposed to make conforming revisions in light of the proposed revisions regarding recipient institution fees and foreign taxes. Finally, the Bureau proposed to temporarily delay the effective date of the final rule and to extend the final rule s effective date until 90 days after this final rule is published. 3 C. Overview of Comments and Outreach The Bureau received more than 100 comments on the December Proposal. The majority of comments were submitted by industry commenters, including depository institutions and money transmitters that provide remittance transfers, and industry trade associations. In addition, the Bureau received comment letters from consumer groups and several individuals. 4 3 As noted above, the Bureau published the Temporary Delay Rule on January 29, 2013, which temporarily delayed the February 7, 2013 effective date of the 2012 Final Rule. 4 Comments that solely addressed whether the Bureau should have delayed the February 7, 2013 Most industry commenters supported, or did not oppose, the proposed additional flexibility regarding the disclosure of recipient institution fees. However, many of these commenters further urged the Bureau to eliminate altogether the requirement that remittance transfer providers disclose recipient institution fees for remittance transfers to an account. These commenters largely reemphasized and expanded upon arguments that commenters had asserted prior to the publication of the February Final Rule. Primarily, that for remittance transfers sent through open networks it is very difficult, and in some cases impossible, for providers to know or even to estimate with any degree of accuracy the fees imposed on remittance transfers by recipient institutions. Commenters also argued that for wire transfers sent over the open network, the number of recipient institutions that might receive transfers, and thus assess fees, posed a challenge for any one U.S. institution, even a large correspondent bank, attempting to learn and accurately disclose these fees. Relatedly, commenters noted that existing systems for sending wire transfers in open networks generally do not provide a sending institution any insight into the fees charged by the recipient institution. Some of these commenters contended that Congress did not intend to require the disclosure of recipient institution fees. In addition, industry commenters argued that the fees charged by recipient institutions for remittance transfers to an account are already transparent to the recipient (because the recipient typically has a preexisting relationship with the recipient institution), do not add transparency that benefits senders in any meaningful way, and may result in overpayment by the sender (particularly to the extent that the December Proposal permits estimates of the highest possible fee). These commenters also expressed concern that the additional flexibility proposed by the Bureau would not substantially reduce the burdens of compliance with the fee disclosure provisions because it would be difficult for remittance transfer providers to locate the materials needed such as data from prior transactions, fee schedules, or industry surveys to provide estimates of recipient institution fees under the proposed provisions. Relatedly, many industry commenters argued that the effort needed to compile this information would be of relatively little effective date were addressed in the Temporary Delay Rule and are not separately addressed herein. VerDate Mar<15> :55 May 21, 2013 Jkt PO Frm Fmt 4701 Sfmt 4700 E:\FR\FM\22MYR2.SGM 22MYR2 value to senders of remittance transfers when contrasted with the increased cost of providing the disclosures. Consumer groups expressed differing views regarding the Bureau s proposal with respect to the disclosure of recipient institution fees. Some argued that senders of remittance transfers would be better served by disclosures that inform them only that recipient institutions may charge fees rather than with disclosures containing estimates of the fees. Others argued that Congress had intended for remittance transfer providers to arrange with recipient institutions to secure the information necessary to disclosure the relevant fee information and therefore maintained that the Bureau should make the proposed estimation provisions temporary in nature to allow and encourage providers to develop databases containing information that would eventually permit accurate disclosures of all fees imposed on remittance transfers, including recipient institutions fees. Comments received regarding the proposed adjustments to the disclosure of foreign taxes generally mirrored the comments received regarding recipient institution fees. Again, while industry commenters generally stated that they appreciated the Bureau s proposal to eliminate the requirement to disclose subnational taxes as well as increase remittance transfer providers flexibility to estimate other applicable foreign taxes, most industry commenters also urged the Bureau to eliminate altogether the requirement to disclose taxes collected by a person other than the provider. Consumer groups expressed differing views as to whether the Bureau should adopt the proposed revisions. Based on the perceived difficulty of knowing foreign taxes, some consumer group commenters supported the proposed flexibility with respect to the disclosure of foreign taxes in general and the elimination of the requirement to disclose subnational taxes in particular and they also emphasized the difficulty of providing tax disclosures. Others commenters urged that the Bureau should maintain the requirement that providers disclose all taxes imposed on a remittance transfer by a person other than the provider because doing so is the only way for senders to know precisely the amount that designated recipients will receive. With respect to the Bureau s proposal to create an exception to the definition of error in the 2012 Final Rule, industry commenters uniformly supported the proposed change. Commenters repeated much of the reasoning put forth by the Bureau in the December Proposal that

6 30666 Federal Register / Vol. 78, No. 99 / Wednesday, May 22, 2013 / Rules and Regulations in many instances remittance transfer providers are unable to verify the accuracy of account numbers and that providers should not have to bear the cost of a lost transfer. Commenters reiterated the fear that unscrupulous senders would abuse the 2012 Final Rule s remedy provisions for their own benefit, and that the attendant risk of loss could be significant enough that many providers might either exit the remittance transfer business or severely curtail their offerings. In addition, many industry commenters requested that the Bureau expand the proposed exception to the definition of the term error to include all mistakes in information provided by senders that could lead to an error under the rule, rather than just incorrect account numbers. Consumer group commenters were divided on whether the Bureau should adopt the proposed exception to the definition of error. Two consumer groups argued that the proposed exception would properly calibrate the incentives for remittance transfer providers to prevent errors. These groups also agreed that remittance transfer providers should not have to bear the loss of a missing transfer when funds cannot be retrieved due to an error by the sender. Other consumer group commenters urged the Bureau not to adopt the proposed changes to the definition of the term error on the grounds that they are unnecessary because of existing error resolution procedures in subpart A of Regulation E, harmful to consumers who can ill afford to bear the loss of a missing transfer, and contrary to the intent of Congress. In addition to the comments received on the December Proposal, the Bureau staff conducted outreach with various parties about the issues raised by the December Proposal or raised in comments. Records of these outreach conversations are reflected in ex parte submissions included in the rulemaking record (accessible by searching by the docket number associated with this final rule at IV. Legal Authority Section 1073 of the Dodd-Frank Act created a new section 919 of the EFTA that requires remittance transfer providers to provide disclosures to senders of remittance transfers, pursuant to rules prescribed by the Bureau. In particular, providers must give a sender a written pre-payment disclosure containing specified information applicable to the sender s remittance transfer, including the amount to be received by the designated recipient. The provider must also provide to the sender a written receipt that includes the information provided on the pre-payment disclosure, as well as additional specified information. EFTA section 919(a). In addition, EFTA section 919(d) provides for specific error resolution procedures and directs the Bureau to promulgate rules regarding appropriate cancellation and refund policies. Except as described below, the final rule is issued under the authority provided to the Bureau in EFTA section 919, and as more specifically described in this SUPPLEMENTARY INFORMATION. In addition to the Dodd-Frank Act s statutory mandates, EFTA section 904(a) authorizes the Bureau to prescribe regulations necessary to carry out the purposes of the title. The express purposes of the EFTA, as amended by the Dodd-Frank Act, are to establish the rights, liabilities, and responsibilities of participants in electronic fund and remittance transfer systems and to provide individual consumer rights. EFTA section 902(b). EFTA section 904(c) further provides that regulations prescribed by the Bureau may contain any classifications, differentiations, or other provisions, and may provide for such adjustments or exceptions for any class of electronic fund transfers or remittance transfers that the Bureau deems necessary or proper to effectuate the purposes of the title, to prevent circumvention or evasion, or to facilitate compliance. As described in more detail below, certain provisions of the 2013 Final Rule are adopted pursuant to the Bureau s authority under EFTA sections 904 (a) and (c). V. Section-by-Section Analysis of the Final Rule Section Remittance Transfer Definitions Section incorporates certain definitions applicable to the remittance transfer provisions in subpart B of Regulation E. Under the 2012 Final Rule, the introductory language in states that for purposes of this subpart, the following definitions apply. The Bureau is revising in the 2013 Final Rule this introductory language to clarify that, except as otherwise provided, for purposes of subpart B of Regulation E, the definitions in apply. 30(c) Designated Recipient Under the 2012 Final Rule, the term designated recipient is defined to mean any person specified by the sender as the authorized recipient of a remittance transfer to be received at a location in a foreign country. Section VerDate Mar<15> :55 May 21, 2013 Jkt PO Frm Fmt 4701 Sfmt 4700 E:\FR\FM\22MYR2.SGM 22MYR (c). Comment 30(c) 1 further clarifies that a designated recipient can be either a natural person or an organization, such as a corporation. See (j) (definition of person). Relatedly, (b)(2)(iii) requires a remittance transfer provider to disclose to a sender the name of the designated recipient. Thus, the provider must ascertain this name from the sender at or before the receipt or combined disclosure is provided to the sender. As discussed below in the section-bysection analysis of (a)(1)(iv), the Bureau is adopting certain revisions to 2012 Final Rule s error resolution provisions in where a transfer is delivered to someone other than the designated recipient. In particular, (a)(1)(iv)(D) creates a new exception to the definition of error in (a)(1)(iv) that applies when a sender provides an incorrect account number or recipient institution identifier, and the conditions in (h) are met. Based on comments received regarding these proposed changes, and, in particular, concerning the specific mistakes by a sender that might result in an error under the 2012 Final Rule, the Bureau believes that it would be useful to provide further clarity on how the designated recipient is determined for purposes of determining whether an error has occurred or the new exception under (a)(1)(iv) applies. In particular, the Bureau believes it necessary to address situations in which the transfer is delivered to someone other than the designated recipient named by the sender at the time of the transfer. Therefore, the Bureau is clarifying in comment 30(c) 1 that the designated recipient is identified by the name of the person stated on the disclosure provided pursuant to (b)(1)(iii). 30(h) Third-Party Fees As discussed in detail below in the section-by-section analysis of , the Bureau is eliminating the requirement to disclose certain recipient institution fees and to include such fees in the calculation of the disclosed amount to be received by the designated recipient. In order to differentiate between fees that must be disclosed and included in the calculation of the amount to be received and those that are no longer required to be disclosed and included in such calculation, the Bureau is adopting definitions under (h) for covered third-party fees, required to be calculated and disclosed under subpart B of Regulation E, and non-covered third-party fees, which are not required to be calculated and

7 Federal Register / Vol. 78, No. 99 / Wednesday, May 22, 2013 / Rules and Regulations disclosed. Section (h)(1) defines the term covered third-party fees to mean any fee that is imposed on the remittance transfer by a person other than the remittance transfer provider, except for non-covered third-party fees as described in (h)(2). Section (h)(2) defines the term noncovered third-party fees to mean any fees imposed by the designated recipient s institution for receiving a transfer into an account, except if the institution acts as an agent of the remittance transfer provider. The rationale underlying the distinctions made in these definitions is discussed further below in the discussion of (b)(1)(vi). The 2013 Final Rule adds new commentary to 30(h) to explain the scope of these fees. Drawing from applicable examples of fees imposed by a person other than the remittance transfer provider that were in comment 31(b)(1) 1.ii in the 2012 Final Rule, as well as proposed comments 31(b)(1) iii and iv which would have provided additional clarification on how to disclose recipient institution fees, comment 30(h) 1 explains that fees imposed on the remittance transfer by a person other than the provider include only those fees that are charged to the designated recipient and are specifically related to the remittance transfer. Comment 30(h) 1 additionally provides examples of fees that are or are not specifically related to the remittance transfer. For example, overdraft fees that are imposed by a recipient s bank or funds that are garnished from the proceeds of a remittance transfer to satisfy an unrelated debt are not fees imposed on the remittance transfer because these charges are not specifically related to the remittance transfer. Comment 30(h) 1 further states that account fees are also not specifically related to a remittance transfer if such fees are merely assessed based on general account activity and not for receiving transfers. Comment 30(h) 1 additionally clarifies that fees that banks charge one another for handling a remittance transfer or other fees that do not affect the total amount that will be received by the designated recipient are not fees imposed on the remittance transfer. Comment 30(h) 1 also clarifies that fees that specifically relate to a remittance transfer may be structured on a flat per-transaction basis, or may be conditioned on other factors (such as account status or the quantity of remittance transfers received) in addition to the remittance transfer itself. In addition, the 2013 Final Rule adds new commentary to explain the difference between covered and noncovered third-party fees. Comment 30(h) 2.i explains that under (h)(1), a covered third-party fee means any fee that is imposed on the remittance transfer by a person other than the remittance transfer provider including fees imposed by a designated recipient s institution for receiving a transfer into an account where such institution acts as an agent of the provider for the remittance transfer. As noted above, the rationale for this distinction is discussed further below in the section-by-section analysis of (b)(1)(vi). Comment 30(h) 2.ii provides examples of covered thirdparty fees including fees imposed on a remittance transfer by intermediary institutions in connection with a wire transfer and fees imposed on a remittance transfer by an agent of the provider at pick-up for receiving the transfer. With respect to non-covered thirdparty fees, comment 30(h) 3 explains that a non-covered third-party fee means any fee imposed by the designated recipient s institution for receiving a transfer into an account, unless the institution is acting as an agent of the remittance transfer provider. It further provides as an example that a fee imposed by the designated recipient s institution for receiving an incoming transfer could be a non-covered thirdparty fee provided such institution is not acting as the agent of the provider. In addition, comment 30(h) 3 explains that designated recipient s account in (h)(2) refers only to an asset account, regardless of whether it is a consumer asset account, established for any purpose and held by a bank, savings association, credit union, or equivalent institution. It does not, however, include a credit card, prepaid card, or a virtual account held by an Internetbased or mobile telephone company that is not a bank, savings association, credit union or equivalent institution. The rationale for this interpretation is also discussed further below in the sectionby-section analysis of (b)(1)(vi). Section Disclosures EFTA sections 919(a)(2)(A) and (B) require a remittance transfer provider to disclose, among other things, the amount to be received by the designated recipient in the currency in which it will be received. In the 2012 Final Rule under , the Bureau set forth the disclosure requirements for providers, including that providers disclose fees and taxes imposed by a person other than the provider. Pursuant to EFTA section 919(a)(4)(A), the Bureau adopted VerDate Mar<15> :55 May 21, 2013 Jkt PO Frm Fmt 4701 Sfmt 4700 E:\FR\FM\22MYR2.SGM 22MYR2 an exception in (a) to provide that for certain disclosures by insured depository institutions or credit unions regarding the amount of currency that will be received by the designated recipient will be deemed to be accurate in certain circumstances so long as the disclosure provides a reasonably accurate estimate of the amount of currency to be received. As noted in the December Proposal, after the Bureau issued the February Final Rule, industry participants continued to express concerns previously raised in response to the Board s proposed rule to implement EFTA section 919. The concerns regarded the feasibility of disclosing fees imposed by a designated recipient s institution. For the subset of transfers sent over the open network, industry participants stated that where a designated recipient s institution charges that recipient fees for receiving a transfer into an account, the remittance transfer provider would not typically know whether the recipient had agreed to pay such fees or how much the recipient had agreed to pay. Some industry participants also requested guidance on whether and how to disclose recipient institution fees that can vary based on the recipient s status with the institution, quantity of transfers received, or other variables that are not easily knowable by the sender or the provider. Separately, after the release of the February 2012 Rule, industry expressed concern about the disclosure of foreign taxes. Industry participants argued first that it is significantly more burdensome to research and disclose subnational taxes, i.e., taxes imposed by regional, provincial, state, and other local governments than it is to research and disclose those taxes imposed by a country s central government because there are substantially more jurisdictions that could impose these subnational taxes. Second, industry participants suggested that the guidance in the 2012 Final Rule under comment 31(b)(1)(vi) 2, which would allow remittance transfer providers to rely on senders representations regarding variables that affect the amount of taxes imposed by a person other than the provider is insufficient where variables that influence the amount of taxes imposed by a person other than the provider are not easily knowable by the sender or the provider. With respect to both recipient institution fees and foreign taxes, industry stated that, to make the appropriate calculations and disclosures, remittance transfer

8 30668 Federal Register / Vol. 78, No. 99 / Wednesday, May 22, 2013 / Rules and Regulations providers might need to ask numerous questions of senders that senders might not understand or might not be able to answer. With respect to fees, industry also stated that the calculations required to determine and disclose fees might vary with respect to each recipient institution because each of these institutions might have unique fee schedules that applied to particular accounts or different ways of imposing fees on remittance transfers. In response to these comments, in the December Proposal, the Bureau proposed to provide additional flexibility and guidance regarding the calculation and disclosure of fees imposed by a designated recipient s institution for receiving a transfer into an account and taxes imposed by a person other than the remittance transfer provider. The Bureau also proposed to eliminate the requirement to disclose regional, provincial, state, and other local foreign taxes and to include this amount in the disclosed amount received by the designated recipient. The Bureau sought comment on whether these proposed changes achieved the goals stated in the December Proposal, or whether the existing rules or another alternative were preferable. The majority of comments on the proposed changes regarding recipient institution fee and tax disclosures came from industry participants, including large banks, community banks, credit unions, non-depository institutions, and trade associations. These commenters stated that they appreciated the Bureau s attempts to facilitate compliance, particularly with respect to the proposal to eliminate the required disclosure of subnational taxes. However, many industry commenters argued that the proposed changes did not go far enough to ease compliance burden. These industry commenters asserted that the proposed flexibility would not effectively mitigate the difficulty of researching the information needed to provide the recipient institution fee and foreign tax disclosures to senders. Further, these industry commenters also expressed concern that the proposed estimation methods could increase consumer confusion due to discrepancies in the estimated amounts disclosed. Moreover, industry commenters expressed concern that, under the estimation methods described in the December Proposal, the sender would usually receive a disclosure that showed the highest possible fee or tax that could apply. As a result of this proposed highest estimation method, commenters stated that the disclosure could result in senders increasing the amount of money transferred more than was necessary to insure that a recipient received the expected amount. Some consumer groups also expressed skepticism about the proposed estimation methods for a different reason: they believed that any additional estimation, beyond that permitted in the 2012 Final Rule, would be detrimental to senders because they would not know the precise amount of the transfer that would be received. In contrast, other consumer groups supported the December Proposal and stated that it struck the proper balance of facilitating compliance, while also providing meaningful information to senders. The Bureau has carefully weighed these concerns and, for the reasons explained in detail below, the Bureau believes that it is appropriate to exercise its exception authority under EFTA section 904(c) to eliminate the requirement to include certain recipient institution fees and taxes collected by a person other than the remittance transfer provider in the calculation of the amount to be received by the designated recipient pursuant to (b)(1)(vii). For the same reasons, the Bureau is eliminating the requirement to disclose these amounts under (b)(1)(vi). However, as noted above, the Bureau believes that a majority of remittance transfers are sent through closed networks whereby the recipient picks up the transfer from an agent. In these cases, all fees imposed on the remittance transfer would continue to be required to be disclosed. See (h)(1). For those minority of transfers where there may be non-covered third-party fees, the 2013 Final Rule requires that remittance transfer providers include, as applicable, a disclaimer on the prepayment disclosure and receipt, or combined disclosure, indicating that the recipient may receive less due to fees charged by the recipient s bank. See (b)(1)(viii). Similarly, if there may be taxes collected on the remittance transfer by a person other than the provider, the 2013 Final Rule requires that providers include a disclaimer indicating that the recipient may receive less due to foreign taxes. As part of these disclaimers, providers may choose to disclose an exact or estimated amount of these fees or taxes. See (b)(3). As described in detail below, the 2013 Final Rule s Appendix and Model Forms have been amended to include samples of the new disclosures and disclaimers. The Bureau is also making conforming edits in several other VerDate Mar<15> :55 May 21, 2013 Jkt PO Frm Fmt 4701 Sfmt 4700 E:\FR\FM\22MYR2.SGM 22MYR2 provisions in to reflect the changes in the required disclosures. These changes are described below. 31(a) General Form of Disclosures 31(a)(1) Clear and Conspicuous In the 2013 Final Rule, (a)(1) provides that disclosures required by subpart B of Regulation E must be clear and conspicuous. It also states that disclosures required by this subpart may contain commonly accepted or readily understandable abbreviations or symbols. As is explained in detail below, as part of the changes adopted in the 2013 Final Rule, the Bureau is adding two optional disclosures. First, the Bureau is making optional the requirement to disclose non-covered third-party fees and taxes collected on the remittance transfer by a person other than the remittance transfer provider. See (b)(1)(viii). Second, the Bureau is creating an exception to the definition of error for certain mistakes made by senders. See (a)(1)(iv)(D). If a provider wants to take advantage of this exception, it must provide a notice before the sender authorizes the remittance transfer consistent with (h)(3). While these two disclosures are optional, the Bureau believes it is important to ensure that they are made in a manner that is clear and conspicuous. Thus, the Bureau is amending (a)(1) to state that disclosures required by subpart B of Regulation E or permitted by (b)(1)(viii) or (h)(3) must be clear and conspicuous. Disclosures required by subpart B of Regulation E or permitted by (b)(1)(viii) or (h)(3) may contain commonly accepted or readily understandable abbreviations or symbols. 31(b) Disclosure Requirements Comment 31(b) 1 Disclosures Provided as Applicable Comment 31(b) 1 to the 2012 Final Rule provides examples of when certain disclosures may not be applicable and therefore need not be disclosed. Because of the changes that the Bureau is making with respect to the disclosure of noncovered third-party fees and taxes collected on a remittance transfer by a person other than the remittance transfer provider, the 2013 Final Rule makes certain revisions to the commentary in the 2012 Final Rule for consistency and clarification. Comment 31(b) 1 clarifies that for disclosures required by (b)(1)(i) through (vii), a provider may disclose a term and state that an amount or item is not

9 Federal Register / Vol. 78, No. 99 / Wednesday, May 22, 2013 / Rules and Regulations applicable, N/A, or None. Consistent with the changes made in the 2013 Final Rule regarding the disclosure of non-covered third-party fees and taxes collected on a remittance transfer by a person other than the provider, comment 31(b) 1 is revised to state that if fees are not imposed or taxes are not collected in connection with a particular transaction the provider need not provide the disclosures about fees and taxes generally required by (b)(1)(ii), the disclosures about covered third-party fees generally required by (b)(1)(vi), or the disclaimers about non-covered thirdparty fees and taxes collected on a remittance transfer by a person other than the provider generally required by (b)(1)(viii). Comment 31(b) 2 Substantially Similar Terms, Language, and Notices As adopted by the 2012 Final Rule, comment 31(b) 2 states that terms used on the disclosures under (b)(1) and (2) may be more specific than the terms provided and notes, as an example, that a remittance transfer provider sending funds to Colombia may describe a tax disclosed under (b)(1)(vi) as a Colombian Tax in lieu of describing it as Other Taxes. In light of the changes discussed below regarding the disclosure of foreign taxes, the 2013 Final Rule eliminates as an example the disclosure of a Colombian tax. Instead, the 2013 Final Rule provides as an example that a provider sending funds may describe fees imposed by an agent at pick-up as Pick-up Fees in lieu of describing them as Other Fees. In addition, in light of the new disclosures permitted by (b)(1)(viii) and (h)(3), the comment makes conforming changes to note that the foreign language disclosures required under (g) must contain accurate translations of the terms, language, and notices required by (b) or permitted by (b)(1)(viii) and (h)(3). 31(b)(1) Pre-Payment Disclosures 31(b)(1)(ii) Fees Imposed and Taxes Collected by the Provider Section (b)(1)(ii) of the 2012 Final Rule states that a remittance transfer provider must disclose any fees and taxes imposed on the remittance transfer by the provider, in the currency in which the remittance transfer is funded, using the terms Transfer Fees for fees and Transfer Taxes for taxes or substantially similar terms. Since the Board s initial proposal, commenters have argued that because a tax is imposed by a government, and not by the provider, this provision may be confusing. The Bureau agrees that the original formulation may be inexact insofar as taxes are typically imposed by governments, even though they may be collected by providers. As a result, for clarity, the Bureau is revising this language to refer to taxes collected by the provider. This change is for clarification only and is not intended to change the meaning of the provision in the 2012 Final Rule. Consequently, (b)(1)(ii) of the 2013 Final Rule is revised to state, more precisely, that a provider must disclose any fees imposed and any taxes collected on the remittance transfer by the provider. 5 Comment 31(b)(1) 1 Fees and Taxes Comment 31(b)(1) 1 to the 2012 Final Rule provides general guidance on the disclosure of fees and taxes. Comment 31(b)(1) 1.i explains that taxes imposed on the remittance transfer by the remittance transfer provider, which are required to be disclosed under (b)(1)(ii), include taxes imposed on the remittance transfer by a State or other governmental body, and comment 31(b)(1) 1.ii focuses more specifically on how to disclose fees and taxes imposed on the remittance transfer by a person other than the provider as required by (b)(1)(vi). In the December Proposal, the Bureau proposed additional clarification on other types of recipient institution fees that are, or are not, specifically related to a remittance transfer. For organizational purposes, the December Proposal divided comment 31(b)(1) 1.ii into new proposed comment 31(b)(1) 1.ii through 1.v. Specifically, proposed comment 31(b)(1) 1.ii would have contrasted the fees and taxes required to be disclosed by (b)(1)(ii) and the fees and taxes required to be disclosed by (b)(1)(vi). Proposed comment 31(b)(1) 1.iii would have revised the reference to taxes imposed by a foreign government to taxes imposed by a foreign country s central government, and the proposed commentary would have built on the existing guidance regarding applicable recipient institution fees to clarify that account fees are not specifically related to a remittance transfer if such fees are merely assessed based on general account activity and not for receiving transfers. Proposed comment 31(b)(1) 1.iv additionally would have explained that a fee that specifically relates to a remittance transfer may be structured on a flat per-transaction basis, or may be 5 The Bureau has made conforming changes throughout the 2013 Final Rule. VerDate Mar<15> :55 May 21, 2013 Jkt PO Frm Fmt 4701 Sfmt 4700 E:\FR\FM\22MYR2.SGM 22MYR2 conditioned on other factors (such as account status or the quantity of remittance transfers received) in addition to on the remittance transfer itself. Proposed 31(b)(1) 1.v would have provided that the terms used to describe the fees and taxes imposed on the remittance transfer by the provider in (b)(1)(ii) and imposed on the remittance transfer by a person other than the provider in (b)(1)(vi) must differentiate between such fees and taxes. Insofar as the Bureau is eliminating the requirement to disclose non-covered third-party fees and taxes collected on the remittance transfer by a person other than the provider, the Bureau is not adopting the proposed revisions to comments 31(b)(1) 1.ii. Instead, applicable examples concerning the types of fees related to a remittance transfer that must be disclosed have been moved to the commentary to (h), as discussed above. See comment 30(h) 1. The Bureau is, however, modifying certain aspects of the remaining commentary in light of the new definitions and the elimination of the requirement to disclose taxes collected on the remittance transfer by a person other than the provider. In comment 31(b)(1) 1.i of the 2013 Final Rule, the reference to (b)(1)(vi) is removed to focus on the scope of fees imposed or taxes collected on the remittance transfer by the provider that are required to be disclosed under (b)(1)(ii). The Bureau is also revising comments 31(b)(1) 1.ii, 31(b)(1) 2, and 31(b)(1) 3 of the 2013 Final Rule commentary consistent with new scope of the required disclosures and the movement of certain commentary to 30(h). In addition, the 2013 Final Rule divides existing commentary in 31(b)(1) 1.ii to create a new comment 31(b)(1) 1.iii for clarity. 31(b)(1)(v) Transfer Amount Section (b)(1)(v) of the 2012 Final Rule requires remittance transfer providers to disclose the transfer amount in the currency in which the funds will be received by the designated recipient. Under (b)(1)(v) of the 2012 Final Rule, providers are required to disclose the transfer amount only if applicable fees and taxes are imposed by persons other than the provider under (b)(1)(vi), in order to demonstrate to the sender how such fees reduce the amount received by the designated recipient. Insofar as (b)(1)(vi) in the 2013 Final Rule will now only require disclosure of covered third-party fees, the Bureau has made conforming changes to the appropriate reference in

10 30670 Federal Register / Vol. 78, No. 99 / Wednesday, May 22, 2013 / Rules and Regulations (b)(1)(v) to clarify that the section implicates covered third-party fees only rather than all fees and taxes imposed on the remittance transfer by a person other than the provider. 31(b)(1)(vi) Covered Third-Party Fees Section (b)(1)(vi) of the 2012 Final Rule requires remittance transfer providers to disclose any fees and taxes imposed on the remittance transfer by a person other than the provider, in the currency in which the funds will be received by the designated recipient. As discussed above, the Bureau is refining the 2012 Final Rule with respect to the disclosure of certain recipient institution fees and foreign taxes. The rationale for these changes is discussed below. Disclosure of Recipient Institution Fees Since the Board first proposed to amend Regulation E to implement the Dodd-Frank Act s remittance transfer provisions, industry participants and representatives have argued that particularly for remittance transfers that take place over an open network, the requirement to disclose third-party fees is unduly burdensome, if not impossible, given the potential number of institutions involved in any one transfer and the fact that remittance transfer providers typically have no direct relationships with recipient institutions. In issuing the February Final Rule, the Bureau recognized the challenges for providers in disclosing fees imposed by third parties, but determined that the disclosure of thirdparty fees would provide senders with greater transparency regarding the cost of a remittance transfer consistent with the purposes of the EFTA. Consequently, (b)(1)(vi) of the 2012 Final Rule required providers to disclose fees imposed by persons other than the provider (including fees imposed by the designated recipient s institution) and required that such fees be taken into account when calculating the disclosure of the amount to be received under (b)(1)(vii). In view of Congress recognition that these determinations would be difficult in the context of open network transactions by financial institutions, see EFTA section 919(a)(4), (a) permitted insured institutions to estimate the amounts required to be disclosed pursuant to (b)(1)(vi) and (vii) for an interim period when such transfers are sent from a sender s account with the institution and the remittance transfer cannot determine the exact amounts for reasons beyond its control. As noted above, after the Bureau published the February Final Rule, industry participants and representatives continued to express concern through comment letters and other fora that, where a designated recipient s institution charges the recipient fees for receiving a transfer in an account, the remittance transfer provider would not reasonably know, or be able to estimate, the amount of fees that might apply because fees might vary based on agreements between the recipient and the recipient institution. Relatedly, industry participants and representatives requested clarification on whether and how to disclose recipient institution fees that can vary based on the recipient s status with the institution, the account type, the quantity of transfers received, or other variables that are not easily knowable by the sender or the provider. In response to these concerns, in the December Proposal, the Bureau proposed to provide clarification relating to which recipient institution fees remittance transfer providers were required to disclose and additional flexibility and guidance on how recipient institution fees could be disclosed. Proposed comment 31(b)(1) 1.ii would have provided additional examples to distinguish between fees that are specifically related to the remittance transfer and therefore required to be disclosed under (b)(1)(vi), including fees that are imposed by a recipient s institution for receiving a wire transfer, and other types of recipient institution fees that are not specifically related to a remittance transfer, such as a monthly maintenance fee, and therefore not required to be disclosed. For example, the proposed comment would have noted that fees that specifically relate to a remittance transfer may be structured on a flat per-transaction basis, or may be conditioned on other factors (such as account status or the quantity of remittance transfers received) in addition to the remittance transfer itself. Moreover, similar to the treatment of taxes imposed by a person other than the remittance transfer provider under the 2012 Final Rule, the Bureau proposed to add comment 31(b)(1)(vi) 4 to clarify that a provider could rely on a sender s representation regarding variables that affect the amount of fees imposed by the recipient s institution for receiving a transfer in an account where the provider did not have specific knowledge regarding such variables. Additionally, the December Proposal proposed to allow all remittance transfer providers, not just insured institutions covered by the temporary exception, the flexibility to estimate on a permanent basis certain fees imposed by a VerDate Mar<15> :55 May 21, 2013 Jkt PO Frm Fmt 4701 Sfmt 4700 E:\FR\FM\22MYR2.SGM 22MYR2 designated recipient s institution for receiving a transfer into an account. Specially, where a provider did not have specific knowledge regarding variables that affect the amount of fees imposed by a designated recipient s institution for receiving a transfer in an account, proposed (b)(4)(i) would have permitted a provider to disclose the highest possible recipient institution fees that could be imposed on the remittance transfer with respect to any unknown variable, as determined based on either the recipient institution s fee schedules or information ascertained from prior transfers to that same institution. The December Proposal additionally provided in proposed (b)(4)(ii) and its accompanying commentary that, if the remittance transfer provider could not obtain such fee schedules or did not have such information, the provider could rely on other reasonable sources of information, including fee schedules published by competitor institutions, surveys of financial institution fees, or information provided by the recipient institution s regulator or central bank as long as the provider disclosed the highest fees identified through the relied-upon source. The Bureau sought comment on all aspects of this proposal. Although most industry commenters stated that they supported the Bureau s efforts to provide additional flexibility to remittance transfer providers to determine applicable recipient institution fees, many industry commenters argued that the December Proposal would not significantly reduce the burden of disclosing recipient institution fees that are not already known. Describing providers efforts to come into compliance with the 2012 Final Rule, industry commenters stated that efforts to obtain fee information had largely been hampered by the difficulty of obtaining information from recipient institutions with whom providers had no direct relationship, particularly in cases in which fees were governed by contracts between recipient institutions and recipients, i.e., those institutions customers. In additional outreach by the Bureau, one large bank provider and correspondent reported that it had attempted to survey recipient institutions with which it had regular contact, but that the vast majority of institutions had either not provided the requested fee information or failed to respond altogether. In comment letters, as well as outreach both before and after the publication of the December Proposal, industry participants stated that they had difficulty explaining to foreign institutions what was being requested and why the foreign

11 Federal Register / Vol. 78, No. 99 / Wednesday, May 22, 2013 / Rules and Regulations institutions should provide that information. Industry participants further stated that recipient institutions declined to provide the requested fee information, citing proprietary, competitive, and privacy concerns associated with releasing information about their fee schedules and their contractual relationships with their customers. Some industry participants stated that as a result of the difficulty in obtaining fee information from individual institutions, even with the flexibility that the December Proposal would have allowed, they anticipated that the challenges associated with obtaining fee schedules or conducting fee surveys might force them to limit services to countries where fee information was more readily obtainable or where the transfer volume was significant enough to warrant additional efforts to obtain fee information. Though the pertinent comment letters focused on the December Proposal, the arguments echoed concerns that industry participants had previously expressed prior to the 2012 Final Rule with regard to any requirement to disclose fees imposed by persons other than the remittance transfer provider. Industry commenters further opined more generally, as they had prior to the 2012 Final Rule, that a significant number of providers might choose to exit the market altogether, even if the Bureau were to adopt the December Proposal, due to the difficulty of disclosing recipient institution fees. In addition, several industry commenters stated that compared to the 2012 Final Rule, the proposed estimation methodologies would not improve and instead could diminish the quality of the disclosures received by senders or senders ability to comparison shop. With respect to the Bureau s proposal to add commentary clarifying that remittance transfer providers could rely in certain circumstances on senders representations regarding the variables that affect the amount of fees to be imposed by a recipient s financial institution (see proposed (b)(4)), several industry commenters argued that if the sender knew the fees that applied to the recipient s account, then it is likely the sender was getting such information from the recipient, and in such cases the disclosure of recipient institution fees would not provide additional transparency to the sender. By contrast, to the extent that the sender had not received information on the variables that affect fees from the designated recipient, industry commenters argued that relying on a sender s representation would be unlikely to provide reliable information. Industry commenters repeated industry s longstanding assertion that recipients are in the best position to know what fees their institutions impose on receiving transfers, and suggested that the Bureau reconsider its decision to mandate disclosure of such fees or provide a database of fees upon which providers could rely. Many industry commenters also expressed concern with respect to the Bureau s proposal to allow remittance transfer providers to disclose an estimate of the highest possible recipient institution fee that could be imposed on the remittance transfer with respect to any unknown variable (see proposed (b)(4)), as determined based on either fee schedules made available by the recipient institution or information ascertained from prior transfers to the same recipient institution. Commenters stated that if each provider employed its own methodology based on its own research, the highest possible fee estimates would vary, sometimes widely, across institutions. Commenters argued that this could cause consumer confusion and undermine comparison shopping, as senders would have little insight into which estimation model was accurate. Although certain limited estimation is permitted under the 2012 Final Rule for some transfers sent by insured institutions, see (a) and (b), commenters argued that using the additional estimation methodologies permitted under the December Proposal would lead to greater degrees of inaccuracy because of the requirement to disclose the highest estimate possible with respect to certain recipient institution fees where such fees might be unlikely apply. Furthermore, the proposed estimation methodology would have differed from the bases for estimates described in existing (c), which permit a provider to base an estimate on an approach not listed in subpart B of Regulation E so long as the designated recipient receives the same, or greater, amount of funds than the provider disclosed pursuant to (b)(1)(vii). Commenters also suggested that under either the 2012 Final Rule or the December Proposal, smaller institutions would be at a disadvantage, compared to their larger competitors, because they would have fewer resources to collect and maintain extensive data sets regarding account fees for every location to which they did or could send a remittance transfer. Several industry commenters further opined that VerDate Mar<15> :55 May 21, 2013 Jkt PO Frm Fmt 4701 Sfmt 4700 E:\FR\FM\22MYR2.SGM 22MYR2 remittance transfer providers that could provide lower estimates could have a competitive advantage over providers that provided higher (but potentially more accurate) estimates because the providers with lower estimates would appear to be providing designated recipients with more funds, even though the actual fee imposed by the recipient institution for the same designated recipient should generally be the same for transfers sent by the same sender to the same recipient institution. Finally, some industry commenters argued there was a significant risk that if the highest possible fee a recipient institution could impose on receiving a remittance transfer was disclosed, a sender might unnecessarily overfund a remittance transfer to ensure that the designated recipient received a certain amount. For example, a commenter explained, that a sender might want to send a remittance transfer to a merchant to pay for a purchase. The merchant, per its agreement with the receiving institution, might be charged an incoming wire transfer fee. Although the merchant would not expect the sender to pay this fee, as the merchant had incorporated such cost into its overhead, the sender might believe that he or she is responsible for covering this fee and might increase the amount transferred by the amount of the disclosed fee. Because of the limitations they perceived with estimates disclosed under the Bureau s methodology described in the December Proposal, the majority of industry commenters requested that the Bureau eliminate the required disclosure of recipient institution fees altogether. Several of these industry commenters argued, as commenters had argued as part of the 2012 rulemakings, that section 1073 of the Dodd-Frank Act did not expressly require disclosure of recipient institution fees and urged the Bureau to eliminate the required disclosure of recipient institution fees. A few commenters went further and suggested that the Bureau should eliminate the required disclosure of intermediary fees as well. Alternatively, industry commenters suggested that the Bureau delay the implementation date for the disclosure of recipient institution fees until resources for ascertaining such fees could be developed, although such commenters did not indicate that such resources were being developed or that they would soon be available. Consumer group commenters were divided in their reactions to the December Proposal s provisions regarding the disclosure of recipient institution fees. Although some

12 30672 Federal Register / Vol. 78, No. 99 / Wednesday, May 22, 2013 / Rules and Regulations consumer group commenters favored the Bureau s approach in providing increased flexibility and guidance with respect to the disclosure of recipient institution fees, other consumer group commenters believed that the methods of estimation proposed by the Bureau would prove to be problematic for senders and suggested either that the allowance for such estimation be made temporary or that the required disclosure of recipient institution fees be eliminated. Among consumer group commenters who favored the disclosure of recipient institution fees, some opined that recipient institution fee information could become readily available given current technology, and they encouraged the Bureau to, at the very least, make any additional estimate provisions temporary in nature. This would, these commenters argued, provide strong incentives to industry to create databases with the necessary information for compliance. In addition, one comment letter argued that permitting estimated price disclosures essentially permits a continuation of the status quo that Congress intended to change by adopting section 1073 of the Dodd- Frank Act. The commenter further suggested that although a permanent exemption from any disclosure requirements would be premature, a delay in requiring disclosure of recipient institution fees may be needed to provide enough time and the proper incentives for some providers to update their information systems in order to capture this information. By contrast, other consumer group commenters maintained that it was appropriate to eliminate the obligation to disclose recipient institution fees given the difficulty remittance transfer providers (or their partners) face in determining these fees. These commenters argued that, given the inaccuracies inherent in estimating the applicable fees to be applied, senders would be better served by an alternative generic disclosure noting that recipient institutions may charge account fees, rather than requiring the specific disclosure of such fees. In light of information received through comment letters, additional outreach, and the Bureau s independent monitoring of efforts to implement the 2012 Final Rule, the Bureau believes that it is necessary and proper both to effectuate the purposes of the EFTA and to facilitate compliance to exercise its authority under EFTA section 904(c) to eliminate the requirement to disclose recipient institution fees for transfers into an account, except where the recipient institution is acting as an agent of the provider. As stated in the February Final Rule, the Bureau believes that disclosures regarding the fees imposed by persons other than the remittance transfer provider can benefit senders by making them aware of the impact of these fees, helping to decide how much money to send, facilitating comparison shopping, and aiding in error resolution. As described in the February Final Rule, in recent years, a number of concerns with regard to the clarity and reliability of information provided to consumers sending remittance transfers have been identified. Congressional hearings prior to enactment of the Dodd-Frank Act focused on the need for standardized and reliable pre-payment disclosures, suggesting that disclosure of the amount of money to be received by the designated recipient is particularly critical. Research suggests that consumers place a high value on reliability to ensure that the promised amount is made available to recipients. See 77 FR 6199 (and sources cited therein). Despite the public interest in the disclosure of recipient interest fees, however, the Bureau believes that requiring disclosure of such fees in cases in which the recipient institution is not an agent of the provider would at this time either require a substantial delay in implementation of the overall Dodd-Frank Act regime for remittance transfers or produce a significant contraction in access to remittance transfers, particularly for less popular corridors. The Bureau believes that both of these results would substantially harm consumers and undermine the broader purposes of the statutory scheme. Accordingly, the Bureau has constructed the exception to relieve the obligation to disclose recipient institution fees absent an agency relationship between the remittance transfer provider and the recipient institution. The Bureau believes that, in practice, this adjustment of the 2012 Final Rule will affect a minority of remittance transfers. While information on the volume of open-network transfers is limited, the Bureau believes that closed network transfers sent through agents i.e., transfers for which remittance transfer providers must continue to disclose all third-party fees in accordance with the 2012 Final Rule account for the majority of remittance transfers. For the minority of transfers where the exception applies because there is no agency relationship between the remittance transfer provider and the VerDate Mar<15> :55 May 21, 2013 Jkt PO Frm Fmt 4701 Sfmt 4700 E:\FR\FM\22MYR2.SGM 22MYR2 recipient institution, the Bureau has concluded that finalizing the proposed exception in (b)(4) (which would have permitted estimates in certain circumstances) would have significant risks and disadvantages to senders of remittance transfers. First, despite the greater flexibility that the December Proposal would have provided concerning estimation methodologies, the Bureau is concerned that many remittance transfer providers still would have curtailed services particularly outside of heavily used corridors. Second, the Bureau is concerned that the resulting estimates would have varied so widely that their use to consumers in calibrating transfer amounts and comparison shopping would have been limited. The Bureau believes that given current limitations, it is appropriate to require use of a more generic disclaimer to warn consumers where recipient institution fees may apply and to change the model forms in a way that will reduce the risk of consumer confusion in attempting to make comparisons where estimates are provided. The Bureau also believes that it is important to encourage estimates and increasingly reliable methodologies over time, and will continue dialogue with interested stakeholders about how best to make progress toward this goal. The Bureau s conclusion rests in large part on its understanding of the open network systems for sending remittance transfers. As described above, these networks allow remittance transfer providers to send to accounts at banks worldwide. However, providers have limited authority or ability to monitor or control the recipient institutions in such networks. Although the Bureau had expected that industry s implementation efforts would result in the development of the compilation of reliable and current information concerning fees imposed by many recipient institutions for most corridors, the process has been slower and harder than expected and the lack of comprehensive information could lead providers to limit their offerings. Given the current environment, the Bureau believes that estimating, or in some cases, determining the actual recipient institution fees for transfers to accounts consistent with the 2012 Final Rule would be difficult or impracticable given the myriad institutions to which such remittance transfers may be sent and the myriad fee schedules that may apply across these institutions. Even under the Bureau s proposal to provide additional flexibility for remittance transfer providers in estimating certain recipient institution

13 Federal Register / Vol. 78, No. 99 / Wednesday, May 22, 2013 / Rules and Regulations fees for transfers to accounts, the comment letters and the Bureau s outreach suggest that the burden of obtaining and maintaining applicable fee information sufficient to provide the permitted estimates in all cases would still be substantial. The Bureau is concerned that even if it adopted the December Proposal, the requirements to disclose recipient institution fees might cause a number of providers to raise their prices, significantly reduce their offerings, or exit the market due to the requirements related to the disclosure of recipient institution fees. If any price increase were similar to the size of a recipient institution fee, that alone might offset the benefit of improved information about the size of such fees. Furthermore, as the Bureau stated in the December Proposal, the Bureau believes that the loss of market participants would be detrimental to senders by decreasing market competition and the convenient availability of remittance transfer services. Moreover, the Bureau is concerned that the estimate methodologies proposed in the December Proposal would have produced disclosures that varied so widely that their use to senders in calibrating transfer amounts and comparison shopping would have been limited. In many cases, the December Proposal would have required the remittance transfer provider to overestimate recipient institution fees, by disclosing the highest possible fee that could be imposed on the remittance transfer with respect to any unknown variable. To the extent providers used differing methodologies upon which to base their estimates, the disclosed fees could vary significantly across institutions, making it difficult for senders to decide how much money to transmit. In addition, because these fees would be separately disclosed and included within the total to recipient on the disclosure forms, differences in amounts disclosed among remittance transfer providers could lead senders to mistakenly focus on discrepancies within these fees when comparison shopping, even though the actual fee would likely be the same regardless of the provider so long as the sender transmitted the same amount to the same designated recipient at the same institution using the same transfer method. While the Bureau believes that it is important to encourage estimates and increasingly reliable methodologies over time, the Bureau has concluded that given current limitations it is appropriate to require use of a more generic disclaimer to alert senders where recipient institution fees may apply and to change the model forms in a way that will reduce the risk of consumer confusion in attempting to make comparisons where estimates are provided. By providing the disclaimer, senders themselves can investigate such fees. In addition, as discussed in the section-by-section analysis of (b)(1)(viii), providers may be incentivized to seek such information to better compete with providers providing more detailed price information. The Bureau believes this amendment to the disclosure requirements will best preserve senders access to competitive remittance transfer markets, while facilitating continued informationgathering about such fees both by senders and providers. Alternatively, the Bureau considered further delaying implementation of the section 1073 protections, to allow remittance transfer providers to continue to seek more reliable fee information in order to reduce implementation burdens and make feerelated disclosures more accurate and thus more useful for senders. However, the Bureau believes that it is critical to provide senders timely access to the important new consumer protection benefits of the 2012 Final Rule including rights to cancellation and error resolution. Accordingly, the Bureau has tailored its amendments to (b)(1)(vi), and as discussed below, (b)(1)(vii), to focus on the third-party fees that the Bureau believes are most difficult for remittance transfer providers to disclose. Based on the Bureau s outreach, it appears that providers sending transfers through open network systems have had considerably more success in obtaining information needed to estimate or disclose accurately fees imposed by intermediary institutions, as compared to recipient institutions that maintain ongoing customer relationships with individual designated recipients. Some providers (or business partners) have changed or contemplated changing the methods they use to send transfers between bank accounts, in order to avoid the imposition of any intermediary fees. In addition, some providers have worked with correspondents to understand such intermediary fees. Thus, the Bureau is not eliminating the requirement to disclose pursuant to (b)(1)(vi) intermediary bank fees or to include such amount in the calculation of the amount required to be disclosed under (b)(1)(vii). Similarly, although the Bureau is making an adjustment for recipient institution fees that it believes industry VerDate Mar<15> :55 May 21, 2013 Jkt PO Frm Fmt 4701 Sfmt 4700 E:\FR\FM\22MYR2.SGM 22MYR2 cannot reasonably disclose, it is not adjusting the required disclosures for transfers that a recipient picks up at a paying agent. As noted above, the additional guidance included in the December Proposal targeted situations in which providers did not have specific knowledge regarding variables that affect the amount imposed by the recipient s institution for receiving a transfer in an account. By contrast, where the designated recipient s institution is an agent of the remittance transfer provider, the Bureau believes the provider should have access to or be able to contract concerning the disclosure of any fees imposed by such institution. Consequently, the Bureau is maintaining the provider s obligation under the 2012 Final Rule to disclose a designated recipient institution s fees where such recipient institution is acting as an agent of the provider in the remittance transfer. Through a provider s contractual arrangements with its agents, the Bureau believes that such information should be readily available to or obtainable by a provider or that the provider can control such fees, based on the terms of the contract between the provider and such agent. For similar reasons, the Bureau is maintaining the requirement to disclose fees assessed for remittance transfers to credit cards, prepaid cards, or virtual accounts held by an Internet-based or mobile phone company that is not a bank, credit union, or equivalent institution. See comment 30(h) 3. In the December Proposal, the Bureau did not specifically propose to allow estimation of these amounts. Although a few comment letters suggested that the proposed estimates exception should be expanded to cover more than depository institution accounts, such as general purpose reloadable (or prepaid) cards, mobile phones, or mobile or electronic wallets, no commenters suggested that obtaining this information would be as burdensome as the disclosure of depository institution fees. Indeed, upon further outreach, industry participants largely confirmed that currently the majority of such transactions currently take place within a single network whereby such fees are a matter of contract. The Bureau believes that the systems for offering such transfers are still nascent and that currently most of these transfers are provided through systems in which remittance transfer providers have contractual arrangements with the recipient institutions, or the providers and the recipient institutions operate within one single network. The Bureau further believes that these arrangements

14 30674 Federal Register / Vol. 78, No. 99 / Wednesday, May 22, 2013 / Rules and Regulations will likely permit providers to exercise some control over, or learn about, fees charged by recipient institutions. As these systems grow, the Bureau expects that providers, and any associated networks, can design systems so that any associated fees with respect to such transfers are transparent to providers and senders alike. The Bureau does not believe that the same sort of evolution can happen as quickly or easily in existing open network systems, and in particular for the interbank wire transfer system. These systems use communication and settlement protocols that have been developed over decades (or longer) and assume that participating institutions will exercise little control over each other. 6 Furthermore, these systems depend on the participation of many foreign entities that have no duty or incentive to comply with subpart B of Regulation E. Consequently, for purposes of determining the fees imposed on the remittance transfer by the designated recipient s institution for receiving a remittance transfer into an account under (h)(2), the Bureau includes transfers into an asset account, regardless of whether or not it is a consumer asset account, established for any purpose and held by a bank, savings association, credit union, or equivalent institution. See comment 30(h) 3. The Bureau believes that these institutions are likely subject to legacy systems that cannot easily be modified to capture fee information. In light of these conclusions, to effectuate the purposes of the EFTA, the Bureau is exercising its authority under EFTA sections 904(a) and (c) to maintain in (b)(1)(vi) the remittance transfer provider s obligation to disclose covered third-party fees and that such fees be included in the amount disclosed pursuant to (b)(1)(vi), discussed further below. The Bureau believes that providing a total to recipient that reflects the impact of such fees, and separately disclosing these fees, will provide senders with a greater 6 The modern open network banking system evolved slowly over the seventeenth and eighteenth centuries and did not become electronic and automated until the 1970s. The earliest banks did not transfer money between themselves. Over time, however, smaller or more remote banks began to rely on larger mutual or central banks that they all trusted to facilitate transfers of funds although the remote banks had no relationship with one another. Into the mid-twentieth Century, this system became computerized and banks could electronically message one another. See Ben Norman, et al., The History of Interbank Settlement Arrangements: Exploring Central Banks Role in the Payment System (June 2011), available at: papers.ssrn.com/sol3/ papers.cfm?abstract_id= transparency regarding the cost of a remittance transfer. Insofar as the Bureau is eliminating the required disclosure of non-covered third-party fees, the Bureau is also not adopting the suggestion of several industry and consumer group commenters that to facilitate compliance, the Bureau help develop and maintain a database of recipient institution fees that could be accessed by remittance transfer providers. The Bureau continues to believe that because providers are engaged in the business of sending remittance transfers and likely will develop relationships with recipient institutions over time, providers are in a better position than the Bureau is to determine applicable fee information. The Bureau will continue to monitor implementation of this rule and market developments, including whether better information about recipient institution fees becomes more readily available over time. The Bureau will also engage in stakeholder dialogue about methods to encourage improvements in communications methodologies and data gathering so as to promote the provision of increasingly accurate estimates and disclosures of actual fees over time. Disclosure of Foreign Taxes Commenters arguments regarding the disclosure of foreign taxes have largely paralleled their arguments regarding the disclosure of recipient institution fees. Notably, since the Board s proposal, industry has argued that the requirement to disclose foreign taxes is unduly burdensome given the number of jurisdictions that may impose taxes and the challenges of determining whether or how various tax exceptions or exclusions may apply. Although the Bureau recognized the challenges for remittance transfer providers in disclosing foreign taxes, the Bureau also believed that this disclosure would provide senders with greater transparency regarding the cost of a remittance transfer, which the Bureau believed was consistent with the purposes of the EFTA. Consequently, (b)(1)(vi) of the 2012 Final Rule generally would have required that providers disclose foreign taxes and take such taxes into account when calculating the disclosure of the amount to be received under (b)(1)(vii). This disclosure of taxes would have included foreign taxes imposed by a country s central government, as well as taxes imposed by regional, provincial, state, or other local governments. After the Bureau published the 2012 Final Rule, industry continued to express concern about the ability of VerDate Mar<15> :55 May 21, 2013 Jkt PO Frm Fmt 4701 Sfmt 4700 E:\FR\FM\22MYR2.SGM 22MYR2 remittance transfer providers to disclose these foreign taxes in two respects. First, industry argued that it is significantly more burdensome to research and disclose subnational taxes than to research and disclose only foreign taxes imposed by a country s central government, with little commensurate benefit to consumers. Second, industry suggested that the existing guidance on the disclosure of foreign taxes is insufficient where variables that influence the applicability of foreign taxes are not easily knowable by the sender or the provider. In light of these comments, in its December Proposal, the Bureau proposed two revisions to the 2012 Final Rule regarding foreign tax disclosures. First, the proposal would have revised (b)(1)(vi) to state that only foreign taxes imposed by a country s central government on the remittance transfer need to be disclosed. Proposed comment 31(b)(1)(vi) 3 would have further clarified that regional, provincial, state, or other local foreign taxes do not need to be disclosed, although the remittance transfer provider could choose to disclose them. In the event that the subnational taxes were not disclosed, the proposal would have required that a provider state that a disclosure is Estimated. Consistent with this amendment, regional, provincial, state, or other local foreign taxes would not have needed to be taken into account when calculating the disclosure of the amount to be received under (b)(1)(vii). Second, the December Proposal also would have provided additional flexibility regarding the determination of foreign taxes imposed by a country s central government. Under (b)(1)(vi), if a remittance transfer provider did not have specific knowledge regarding variables that affect the amount of these taxes imposed by a person other than the provider, the provider could disclose the highest possible tax that could be imposed on the remittance transfer with respect to any unknown variable. Where a provider relied on this estimation method, the proposal would have required that a provider state that related disclosures are Estimated. The Bureau sought comment on both aspects of these proposed changes, including whether the proposed revisions would facilitate compliance and how the revisions would impact senders. Similar to comments about the proposed revisions to the disclosure of recipient institution fees, the Bureau received numerous comments from industry and consumer groups on its proposed elimination of the subnational

15 Federal Register / Vol. 78, No. 99 / Wednesday, May 22, 2013 / Rules and Regulations tax disclosure and also its proposed methods for the estimation of taxes imposed by a foreign country s central government. With respect to the proposed change related to the elimination of the requirement to disclose subnational taxes and to include such taxes in the calculation of the amount to be received, there was uniform support from industry commenters. Nearly all industry commenters expressed concern that it was infeasible to attempt to research all potential jurisdictions that might impose a subnational tax. Further, industry commenters noted that there would be an ongoing and potentially significant cost required to maintain information related to all subnational tax laws throughout the world given the number of potential jurisdictions that could impose a tax. Additionally, in terms of the feasibility of the disclosure of subnational taxes, one money transmitter also stated that it would be difficult for it to disclose subnational taxes given that its customers were not required, when sending a transfer, to specify a sub-region within a country where the transfer would be picked up. Another money transmitter also stated that, in its experience, it believed that subnational taxes were rare. Although this commenter did not cite any examples of tax practice in specific jurisdictions, this commenter argued that many localities wanted to encourage the inflow of transfers, and therefore, would be unlikely to impose subnational taxes. This commenter and others stated that the cost to determine, in every case, whether subnational taxes applied, a cost that might be passed on to all senders, would outweigh the benefits given that it appeared that such taxes rarely applied in practice. In contrast to the uniform support by industry commenters for the elimination of the requirement to disclose subnational taxes, consumer group commenters were divided regarding their views about the proposed elimination of the requirement to disclose subnational taxes. Some consumer group commenters opposed the proposed change and stated that full disclosure of the exact amount of foreign taxes was critical in order for senders to be aware of exactly how much money would be received. They stated that elimination of the requirement to disclose subnational taxes would harm senders because they would not know with certainty how much money would ultimately be received. Other consumer group commenters, however, stated that the burden of researching and disclosing subnational taxes outweighed the relative benefit to senders. These consumer group commenters noted that some remittance transfer providers could withdraw from the market or increase prices if required to research and disclose subnational taxes. With respect to the Bureau s proposal to allow remittance transfer providers increased flexibility to estimate the taxes imposed by a country s central government, many industry commenters expressed concern that the December Proposal did not sufficiently ease the burden of researching foreign taxes. These industry commenters raised several concerns with respect to the proposed estimated disclosure of taxes imposed by a foreign country s central government. Some industry participants commented that they did not have the capability to research the relevant tax laws in the first place because they did not have foreign contacts, or, alternatively, that they did not have the resources to expend to determine the applicable foreign tax laws. Thus, they asserted that an ability to estimate would not facilitate compliance since such estimation would require an underlying knowledge of the foreign tax laws. Industry commenters, particularly smaller banks and credit unions, also noted that remittance transfer providers were reluctant to rely on information from third-party service providers (such as larger correspondent institutions) because they would have no means to verify the accuracy of the information provided by the third-parties. Further, even where the tax information was accurate, some industry commenters stated that there could be a high cost associated with relying on a third-party provider to obtain that foreign tax information. Similar to industry comments about the disclosure of subnational taxes, commenters stated that these costs not only included the upfront costs of acquiring the tax information but also ongoing costs required to maintain and update tax information. For example, commenters expressed concern that, even if a provider (or a third-party selling the tax information) determined that a particular country did not tax remittance transfers, the provider would need to continue to monitor that country s tax law to know whether any new tax laws were enacted in the future. Industry commenters (as well as some consumer group commenters) stated that some of the burden resulting from the disclosure of foreign taxes imposed by a country s central government could be solved if the Bureau itself developed a tax database that was made available to remittance transfer providers. VerDate Mar<15> :55 May 21, 2013 Jkt PO Frm Fmt 4701 Sfmt 4700 E:\FR\FM\22MYR2.SGM 22MYR2 Industry commenters noted that a Bureau-provided database would eliminate the cost and potential inaccuracy that could result from each provider s individual attempts to determine the applicable foreign taxes. Along similar lines, the Bureau learned through outreach that at least one trade association is developing a database containing information about foreign taxes imposed on remittance transfers by a country s central government. The trade association informed the Bureau that, by working with a third-party, it thought it could eventually determine the relevant tax laws for most countries. The trade association, however, stated that there were several challenges associated with determining and disclosing the applicable tax under the proposed estimation method. According to the trade association and other commenters, one concern was that many foreign taxes have exceptions and exclusions that are not imposed uniformly on all transfers. The trade association noted that, even if a database listed applicable tax laws, it might be difficult for remittance transfer providers, particularly smaller providers, to apply these exceptions and incorporate the exceptions into computer programs or onto forms to arrive at an accurate tax disclosure. Some industry commenters also noted that, if a provider did not apply an exception, that provider might appear to be imposing a higher tax than another provider that applied the exception, even if the tax is the same. Thus, these commenters stated that a sender might misidentify the cheapest provider. Relatedly, several other industry commenters expressed concern that a tax law might be misinterpreted or misunderstood by the remittance transfer provider because of the challenges of interpreting foreign laws. As a result, several industry commenters and a trade association stated that the Bureau should provide a safe harbor for providers that use some reasonable processes to acquire the tax information. Other commenters stated that they would favor a safe harbor whereby, if the provider relied on some reasonable source of information in obtaining tax information, that provider would not be liable if the disclosed tax was incorrect. Industry commenters also echoed similar comments to those made with respect to the December Proposal s provisions regarding the recipient institution fee disclosures, stating that the estimated tax disclosure would be of limited benefit to senders because they believed that in many instances the same tax likely would apply to all

16 30676 Federal Register / Vol. 78, No. 99 / Wednesday, May 22, 2013 / Rules and Regulations transfers to a particular country. As a result, a disclosure of the foreign tax would not improve a sender s ability to comparison shop among remittance transfer providers. In addition, other commenters noted that because the Bureau s proposed estimation method required a disclosure of the highest possible foreign tax that could be imposed with respect to any unknown variable, a sender might transfer more money than was required to compensate for the high estimated tax that the sender believed would be deducted. The commenters noted, for example, that if a sender was transferring funds to a foreign merchant, the higher disclosed tax could harm the sender who inadvertently provided more money than was necessary to pay for a good or service. In contrast to industry commenters and as with respect to the Bureau s proposal to eliminate the requirement to disclose subnational taxes, consumer groups were divided with respect to their comments about the proposed change to allow estimation to be used in the determination of the foreign country tax disclosure. Some consumer groups stated that the estimation of foreign taxes would harm senders because they would not know exactly how much money would be received. In contrast, other consumer groups supported the Bureau s proposed estimation method for those taxes imposed by a country s central government. These consumer groups stated that the Bureau s proposed estimation method would facilitate compliance, and thereby encourage providers to stay in the market or prevent providers from increasing prices. Similar to its reasoning with respect to the elimination of the requirement to disclose certain recipient institution fees, as a result of comments received, additional outreach, and the Bureau s independent monitoring of efforts to implement the 2012 Final Rule, the Bureau believes it is necessary and proper both to further the purposes of the EFTA and to facilitate compliance to exercise its exception authority under EFTA section 904(c) to eliminate the requirement that remittance transfer providers include taxes collected by a person other than the provider including both subnational taxes and taxes imposed by a foreign country s central government, in the calculation of the amount to be disclosed under (b)(1)(vii). Consistent with this revision, the Bureau is also eliminating the requirement to disclose taxes imposed by a person other than the remittance transfer provider under (b)(1)(vi) since such taxes are no longer necessary to clarify the calculation of the amount to be received under (b)(1)(vii). Under the 2013 Final Rule, a provider continues to be required to disclose any taxes collected by the provider, as described under (b)(ii), but providers are no longer required to disclose taxes collected by other persons. As stated in the February Final Rule, the Bureau believes that disclosures regarding the taxes collected by a person other than the remittance transfer provider can benefit senders by making them aware of the impact of these taxes on the total amount transferred, deciding how much money to transfer, facilitating comparison shopping, and aiding in error resolution. Yet, while this foreign tax information is important for consumers, the Bureau is concerned that requiring disclosure of taxes collected by a person other than the provider could at this time produce increased costs for all transactions or result in a significant contraction in access to remittance transfers, particularly for less popular corridors. Similar to its decision about eliminating the requirement to disclose certain recipient institution fees, the Bureau believes that both of these results would substantially harm consumers and undermine the broader purposes of the statutory scheme. Accordingly, the Bureau has concluded that in the current environment, this amendment to the tax disclosure requirements will best preserve access to competitive prices for remittance transfers for a wide range of countries. As with fees, one key factor in the Bureau s decision was a concern that the required tax disclosure might limit the availability of remittance services to certain countries or result in an increased cost for many transfers. With respect to cost increases, under the 2012 Final Rule and the December Proposal, most remittance transfer providers would have needed to conduct research to determine (or purchase information regarding) the relevant foreign tax laws, potentially for many countries. These providers would also need to expend resources to update this information on a regular basis. Although one industry association has been undertaken to develop a database of applicable central government taxes, that association acknowledged several challenges both in developing the database and with how individual providers would make use of the data contained in it. For example, validation and continuous updating of the information collected remains a substantial concern. As described above, the Bureau is concerned that many providers would VerDate Mar<15> :55 May 21, 2013 Jkt PO Frm Fmt 4701 Sfmt 4700 E:\FR\FM\22MYR2.SGM 22MYR2 pass the costs associated with these efforts on to senders in the form of increased prices that would affect remittance transfers across the board, even to countries in which no such taxes are actually imposed. The Bureau also remains concerned that the cost of maintaining the required tax information could cause providers to exit the market, or limit their offerings even if the requirement was limited to taxes imposed by a foreign country s central government. Some providers, for example, might curtail their services and limit transfers only to the highest traffic corridors in order to minimize their necessary foreign tax law research. Because some providers might restrict their services to certain corridors with less volume, a sender might have limited ability to send transfers to those regions. As a result, while the Bureau generally believes that senders can benefit from transparency regarding the foreign tax disclosure, in the present market, the cost of obtaining the necessary tax information may exceed the benefit of this information to many senders. As with recipient institution fees, the Bureau also recognizes that in many instances the benefit of the disclosure may be minimized because the actual foreign tax imposed is likely to be uniform across all remittance transfers to a particular person in a particular country (and, therefore, the same tax would apply). 7 In addition, as with the estimation of recipient institution fees, the disclosure of the highest tax estimates based on any unknown variable, as required in the December Proposal, could result in consumer confusion where providers disclosed different tax estimates. Even if third-party providers developed common databases of information, there is still a risk of inconsistent disclosures depending on providers knowledge of potentially relevant variables, practices, and interpretations of foreign tax law. The Bureau believes that using the general disclaimer and moving any voluntarily provided estimates or actual numbers lower on the form will help to reduce the risk that senders mistakenly choose providers based on discrepancies in tax estimates. Further, rather than adopting a systematic rule that tends to overestimate tax rates, the Bureau believes that senders may prefer 7 The Bureau recognizes that this uniformity may not always be the case. For example, a tax could be imposed differently based on whether the tax law treated transfers sent through a closed or open network differently. But, for most transfers, the Bureau believes that a tax law would apply in the same manner where a transfer was of the same amount to the same destination in a country.

17 Federal Register / Vol. 78, No. 99 / Wednesday, May 22, 2013 / Rules and Regulations to apply different approaches to different types of transfers, for instance by being more conservative about the risk of overfunding a transfer to a business as compared to a family member. The Bureau also does not believe that it is appropriate or feasible to create a safe harbor for remittance transfer providers that rely on a third-party database or some other third-party source for tax information. At this time, the Bureau is not aware of any data source whose accuracy it can guarantee, absent extensive monitoring. The Bureau is not currently positioned to evaluate the accuracy of each database that might be created nor can it determine whether providers are reasonably researching, interpreting, or applying the applicable foreign tax laws. Similarly, the Bureau does not believe that currently it is positioned to create a database itself. In addition, even if a database existed, as noted above, it would still be necessary to determine how the particular tax laws and exceptions or exclusions applied, and the Bureau believes that providers are better positioned to learn over time how foreign tax laws apply to individual transfers. Overall, given the current burden of researching the foreign taxes and the potential risks of sender confusion, increased cost, and reduced transfer services, the Bureau believes that the best result at this time is to eliminate the obligation to disclose taxes collected by parties other than the remittance transfer provider and to eliminate the requirement to include this amount in the calculation of the amount to be received by the designated recipient. The Bureau, however, notes that its decision is based on the current feasibility and cost associated with determining or estimating such taxes imposed on a remittance transfer, as well as the potential impact on market structure and pricing practices. The Bureau intends to monitor whether the development and availability of information regarding taxes collected on a remittance transfer by a person other than the provider becomes more feasible in the future. The Bureau will also engage in stakeholder dialogue about methods to encourage improvements in communications methodologies and data gathering so as to promote the provision of increasingly accurate estimates and disclosures of foreign taxes over time. Conforming Changes to (b)(1)(vi) In light of the changes the Bureau is making with respect to the disclosure of non-covered third-party fees and foreign taxes, (b)(1)(vi) in the 2013 Final Rule requires only the disclosure of covered third-party fees. The 2013 Final Rule also makes conforming edits to comment 31(b)(1)(vi) 1 to reflect that the disclosure of covered third-party fees must be made in the currency in which the funds will be received by the designated recipient. While the revised (b)(1)(vi) provides that only covered third-party fees be disclosed under this subsection, as discussed below, under (b)(1)(viii) a remittance transfer provider would remain free to disclose separately any non-covered third-party fees or taxes collected by a person other than the provider of which it is aware, to the extent consistent with the parameters of that section. 31(b)(1)(vii) Amount Received Section (b)(1)(vi) of the 2012 Final Rule implements EFTA section 919(a)(2)(A)(i) by requiring that a remittance transfer provider disclose to the sender the amount that will be received by the designated recipient, in the currency in which the funds will be received. As adopted by the 2012 Final Rule, this disclosure must reflect all charges that would affect the amount to be received including any recipient institution fees and taxes imposed by a person other than the provider. As stated above, the Bureau is exercising its exception authority under EFTA section 904(c) to revise (b)(1)(vii) to eliminate the requirement to include non-covered third-party fees and taxes collected on a remittance transfer by a person other than the provider in the calculation of the amount received, consistent with the narrowed scope of (b)(1)(vi). Section (b)(1)(vii) of the 2013 Final Rule thus provides that the disclosed amount must be disclosed in the currency in which the funds will be received, using the term Total to Recipient or a substantially similar term except that this amount shall not include any noncovered third party fee or tax collected by a person other than the provider, whether such fee or tax is disclosed pursuant to (b)(1)(viii). While (b)(1)(viii) gives the provider the option to disclose noncovered third-party fees and taxes collected on a remittance transfer by a person other than the provider, as discussed below, a provider cannot, in any circumstance, include these amounts in the amount disclosed under (b)(1)(vii). The Bureau believes that eliminating the requirement to include non-covered third-party fees and taxes collected on the remittance VerDate Mar<15> :55 May 21, 2013 Jkt PO Frm Fmt 4701 Sfmt 4700 E:\FR\FM\22MYR2.SGM 22MYR2 transfer by a person other than the provider in the calculation of the disclosed amount to be received by the designated recipient is necessary and proper to facilitate compliance and further the purposes of the EFTA because the Bureau is concerned that requiring disclosure of such amounts within the amount disclosed under (b)(1)(vii) might hamper senders ability to make informed comparisons across similar providers. The 2013 Final Rule also makes conforming edits to comment 31(b)(1)(vii) to clarify that the amount disclosed pursuant to (b)(1)(vii) must reflect the exchange rate, all fees imposed and all taxes collected on the remittance transfer by the provider, as well as any covered third-party fees as provided by (b)(1)(vi). The Bureau recognizes that in some cases the amount disclosed pursuant to (b)(1)(vii) will not reflect the amount that the designated recipient will ultimately receive due to additional non-covered third-party fees and taxes collected on the remittance transfer by a person other than the provider. 31(b)(1)(viii) Statements That Non- Covered Third-Party Fees or Taxes Collected on the Remittance Transfer by a Person Other Than the Provider May Apply In the December Proposal, the Bureau solicited comment on methods to reduce the burden of required disclosures of fees and taxes imposed on remittance transfers by persons other than the providers and alternative disclosures that could be provided. Several industry and consumer group commenters suggested that in place of requiring exact or estimated disclosures of recipient institution fees or foreign taxes, the Bureau could require a statement within the disclosure forms alerting senders that the total amount received may be reduced by recipient institution fees or foreign taxes. These commenters contended that such a disclosure would ensure that senders are aware of the potential for further reductions in the disclosed amount received, due to fees or taxes that are not disclosed, and would encourage senders and recipients to investigate the fees associated with a transfer to the recipient s financial institution, as compared to those associated with other mechanisms for sending a remittance transfer. Although the Bureau is eliminating the requirement to calculate and disclose non-covered third-party fees and taxes collected on a remittance transfer by a person other than the

18 30678 Federal Register / Vol. 78, No. 99 / Wednesday, May 22, 2013 / Rules and Regulations remittance transfer provider, the Bureau strongly believes that it is nonetheless important to inform senders when fees and taxes that are not disclosed may apply to the remittance transfer. Accordingly, to further the purposes of the EFTA, the Bureau believes that it is necessary and proper to exercise its authority under EFTA sections 904(a) and (c) to add (b)(1)(viii), which requires that a provider include, as applicable, a statement indicating that non-covered third-party fees or taxes collected on the remittance transfer by a person other than the provider may apply to the remittance transfer and result in the designated recipient receiving less than the amount disclosed pursuant to (b)(1)(vii). Moreover, under this paragraph, a provider may, but is not required to, disclose any applicable non-covered third-party fees or taxes collected on the remittance transfer by a person other than the provider using the language set for in Model Forms A 30(b) (d) of Appendix A to this part or substantially similar language. Any such figures must be disclosed in the currency in which the funds will be received, using the language set forth in Model Forms A 30(b) through (d) of Appendix A to this part, as appropriate, or substantially similar language. The exchange rate used to calculate any disclosed non-covered third-party fees or taxes collected on the remittance transfer by a person other than the provider is the exchange rate used in (b)(1)(iv), including an estimated exchange rate to the extent permitted by , prior to any rounding of the exchange rate. Although new (b)(1)(viii) makes the disclosure of the amount of non-covered third-party fees and taxes collected on a remittance transfer by a person other than the provider optional, the Bureau believes that providers may be motivated to collect and disclose such information voluntarily, in the interest of providing high levels of customer service to senders and to better compete for remittance business against other providers. New comment 31(b)(1)(viii) 1 clarifies that if non-covered third-party fees or taxes collected on the remittance transfer by a person other than the remittance transfer provider apply to a particular remittance transfer, or if a provider does not know if such fees or taxes may apply to a particular remittance transfer, (b)(1)(viii) requires the provider to include the disclaimer with respect to such fees and taxes. Comment 31(b)(1)(viii) 1 additionally clarifies that required disclosures under (b)(1)(viii) may only be provided to the extent applicable. For example, if the designated recipient s institution is an agent of the provider and thus, noncovered third-party fees cannot apply to the transfer, the provider must disclose all fees imposed on the remittance transfer and may not provide the disclaimer regarding non-covered thirdparty fees. In this scenario, the commentary clarifies, the provider may only provide the disclaimer regarding taxes collected on the remittance transfer by a person other than the provider, as applicable. New comment 31(b)(1)(viii) 2 explains that (b)(1)(viii) permits a provider to disclose the amount of any non-covered third-party fees or taxes collected on the remittance transfer by a person other than the provider. For example, when a remittance transfer provider knows that the designated recipient s institution imposes a fee or that a foreign tax will apply, the provider may choose to disclose the relevant fee or tax as part of the information disclosed pursuant to (b)(1)(viii). The comment also notes that (b)(3) permits the provider to disclose estimated amounts of such taxes and fees, provided any estimates are based on reasonable source of information. See comment 32(b)(3) 1. It further provides that where the provider chooses, at its option, to disclose the amounts of the relevant recipient institution fee or tax as part of the information disclosed pursuant to (b)(1)(viii), the provider must not include that fee or tax in the amounts disclosed pursuant to (b)(1)(vi) or (b)(1)(vii). 31(b)(2) Receipt 31(b)(2)(i) Pre-Payment Disclosures on Receipt Section (b)(2)(i) in the 2012 Final Rule provides that the same disclosures included in the pre-payment disclosure must be disclosed on the receipt. As discussed above, the Bureau is adding a new requirement that prepayment disclosures include disclaimers when non-covered thirdparty fees or taxes collected on a remittance transfer by a person other than the provider may apply. In addition, as stated above, to facilitate compliance and further the purposes of the EFTA, the Bureau believes it is necessary and proper to exercise its exception authority under EFTA section 904(c) to revise (b)(1)(vii) to eliminate the requirement to include non-covered third-party fees and taxes collected on the remittance transfer by VerDate Mar<15> :55 May 21, 2013 Jkt PO Frm Fmt 4701 Sfmt 4700 E:\FR\FM\22MYR2.SGM 22MYR2 a person other than the remittance transfer provider in the calculation of the amount received, disclosed on the receipt provided to the sender under (b)(2)(i), consistent with the narrowed scope of (b)(1)(vi). As discussed above, to further the purposes of the EFTA, the Bureau also believes that it is necessary and proper to exercise its authority under EFTA sections 904(a) and (c) to require providers to include disclaimers stating, as applicable, that non-covered thirdparty fees or taxes collected by a person other than the provider may apply to the remittance transfer and result in the designated recipient receiving less than the amount disclosed pursuant to (b)(1)(vii). Accordingly, the Bureau is amending the cross-reference in (b)(2)(i) to require that such disclaimers be provided on the receipt. These changes would also be reflected on a combined disclosure. See (b)(3). 31(c) Specific Format Requirements 31(c)(1) Grouping EFTA section 919(a)(3)(A) states that disclosures provided pursuant to EFTA section 919 must be clear and conspicuous. The 2012 Final Rule incorporates this requirement and sets forth grouping, proximity, prominence, size, and segregation requirements to ensure that it is satisfied. In particular, (c)(1) requires that information about the transfer amount, fees and taxes imposed by a person other than the provider, and amount received by the designated recipient be grouped together. The purpose of this grouping requirement is to make clear to the sender how the total amount to be transferred to the designated recipient, in the currency to be made available to the designated recipient, will be reduced by fees imposed or taxes collected on the remittance transfer by a person other than the remittance transfer provider. As previously discussed, under the 2013 Final Rule the disclosure of non-covered thirdparty fees and taxes collected on the remittance transfer by a person other than the provider is no longer required under (b)(1)(vi), or included in the calculation of the amount required to be disclosed under (b)(1)(vii), but instead is subject to new (b)(1)(viii). Consequently, the 2013 Final Rule amends (c)(1) to group the new (b)(1)(viii) disclosure requirement with the information required by (b)(1)(v), (vi), and (vii). The Bureau believes that this grouping will ensure that the sender

19 Federal Register / Vol. 78, No. 99 / Wednesday, May 22, 2013 / Rules and Regulations will understand that the total amount received by the designated recipient will be affected by these additional fees and taxes as applicable. In addition, the Bureau clarifies that although disclosures provided via mobile application or text message to the extent permitted by (a)(5) generally need not comply with the grouping requirements, information required or permitted by (b)(1)(viii) must be grouped with (b)(1)(vii). The Bureau believes that it is important that the new disclaimers which advise of potential additional fees and taxes be grouped with the disclosure of the amount to be received by the designated recipient in order to maximize the likelihood that senders will see the disclaimers and read them in conjunction with the disclosures under (b)(1)(vii). Insofar as the Bureau is requiring that information required or permitted by (b)(1)(viii) be grouped with (b)(1)(vii) for disclosures provided via mobile application or text message, the Bureau is adding guidance in comment 31(c)(1) 1 to explain that to comply with the requirement a provider could send multiple text messages sequentially to provide the full disclosure. 31(c)(2) Proximity To effectuate EFTA section 919(a)(3)(A), (c)(2) of the 2012 Final Rule also requires that certain disclosures be placed in close proximity to each other. The purpose of this proximity requirement is to prevent such disclosures from being overlooked by a sender. As previously discussed, under the 2013 Final Rule the disclosure of non-covered third-party fees and taxes collected by a person other than the provider is no longer required under (b)(1)(vi); instead, remittance transfer providers are subject to the new disclosure provision of (b)(1)(viii). Consequently, the 2013 Final Rule amends (c) to require that the new (b)(1)(viii) disclaimers be in close proximity with the disclosure required by (b)(1)(vii) (the amount received by the designated recipient). Section (c)(2) further notes that disclosures provided via mobile application or text message, to the extent permitted by (a)(5), generally need not comply with the proximity requirements of (c), except that information required or permitted by (b)(1)(viii) must follow the information required by (b)(1)(vii). The Bureau believes that it is important that the new disclaimers which advise of potential additional fees and taxes be grouped in close proximity to the disclosure of the amount to be received by the designated recipient. Insofar as the total amount to be received may not include certain items the disclosure of which is no longer required, the disclaimers should be placed in close proximity to, or in the case of disclosures provided via mobile application or text message follow, the disclosure required by (b)(1)(vii) in order to maximize the likelihood that senders will see the disclaimers and read them in conjunction with the amount disclosed pursuant to (b)(1)(vii). 31(c)(3) Prominence Section (c)(3) sets forth the requirements regarding the prominence and size of the disclosures required under subpart B of Regulation E. In light of the new disclaimer required by (b)(1)(viii), as well as the optional disclosures under that paragraph, the Bureau is making conforming edits to (c)(3) to note that the disclosures required or permitted by (b) when provided in writing or electronically must be provided on the front of the page on which the disclosure is printed, in a minimum eight-point font, except for disclosures provided via mobile application or text message, and must be in equal prominence to each other. Comment 31(c)(4) 2 Segregation Section (c)(4) provides that written and electronic disclosures required by subpart B must be segregated from everything else and contain only information that is directly related to the disclosures required under subpart B. Comment 31(c)(4) 2 in the 2012 Final Rule clarifies that, for purposes of (c)(4), the following is directly related information: (i) The date and time of the transaction; (ii) the sender s name and contact information; (iii) the location at which the designated recipient may pick up the funds; (iv) the confirmation or other identification code; (v) a company name and logo; (vi) an indication that a disclosure is or is not a receipt or other indicia of proof of payment; (vii) a designated area for signatures or initials; (viii) a statement that funds may be available sooner, as permitted by (b)(2)(ii); (ix) instructions regarding the retrieval of funds, such as the number of days the funds will be available to the recipient before they are returned to the sender; and (x) a statement that the provider makes money from foreign currency exchange. In light of new (b)(1)(viii) permitting certain VerDate Mar<15> :55 May 21, 2013 Jkt PO Frm Fmt 4701 Sfmt 4700 E:\FR\FM\22MYR2.SGM 22MYR2 optional disclosures, the Bureau is amending this list to clarify that the optional disclosure of non-covered third-party fees and taxes collected by a person other than the provider is directly related information. 31(f) Accurate When Payment Is Made Section (f) of the 2012 Final Rule states that except as provided in (b), disclosures required by this section must be accurate when a sender makes payment for the remittance transfer, except to the extent estimates are permitted by In light of the new disclaimer required by (b)(1)(viii), as well as the optional disclosures under that paragraph, the Bureau is making conforming edits to (f) and comment 31(f) 1 to note that the disclosures required by (b) or permitted by (b)(1)(viii) must be accurate when a sender makes payment for the remittance transfer, except to the extent estimates are permitted by Comment 31(f) 1 further notes that while a remittance transfer provider is not required to guarantee the terms of the remittance transfer in the disclosures required or permitted by (b) for any specific period of time, if any of the disclosures required or permitted by (b) are not accurate when a sender makes payment for the remittance transfer, a provider must give new disclosures before accepting payment. The Bureau believes that extending the accuracy requirement to the optional disclosures regarding non-covered third party fees and taxes collected by persons other than the remittance transfer provider is necessary in order to communicate accurately to the sender how confident the remittance transfer provider is concerning the information provided. As discussed above, the Bureau believes that such information can be useful to senders under certain circumstances and hopes to encourage use of increasingly reliable information over time. Although the vast majority of remittance transfer providers may choose to disclose any numbers provided as estimates due to the various uncertainties with regard to foreign taxes and fees discussed above, the Bureau believes it is important to preserve remittance transfer providers ability to compete based on disclosure of actual figures. 31(g) Foreign Language Disclosures 31(g)(1) General Section (g) of the 2012 Final Rule explains that disclosures required

20 30680 Federal Register / Vol. 78, No. 99 / Wednesday, May 22, 2013 / Rules and Regulations by the rule must be provided in English and, in certain circumstances, in other languages as well. Similar to the changes discussed above regarding (a)(1) concerning clear and conspicuous disclosures, the Bureau is making conforming edits to (g)(1) to reflect the addition of the optional disclosures elsewhere in the 2013 Final Rule. While the disclosures are optional (see (b)(1)(viii) and (h)(3)), the Bureau believes it is important that they conform to the 2013 foreign language disclosure requirements. Thus, the Bureau is amending (g)(1) to state that except as provided in (g)(2), disclosures required by this subpart or permitted by (b)(1)(viii) or (h)(3) must be made in English and, if applicable in accordance with (g)(1)(i) and (ii). Section Estimates Consistent with EFTA section 919, the 2012 Final Rule generally requires that disclosures provided to senders state the actual exchange rate, fees, and taxes that will apply to a remittance transfer and the actual amount that will be received by the designated recipient of a remittance transfer. Section , as adopted in the 2012 Final Rule, includes only three specific exceptions to this requirement. First, consistent with EFTA section 919(a)(4), (a) of the 2012 Final Rule provides a temporary exception for certain transfers by insured institutions. Second, consistent with EFTA section 919(c), (b)(1) provides a permanent exception for transfers to certain countries. Third, the 2012 Final Rule also includes an exception under (b)(2) for transfers scheduled five or more business days before the date of the transfer. Thus, a remittance transfer provider is permitted to estimate exchange rates, fees, and taxes that are required by to be disclosed to the extent permitted in (a) and (b). The December Proposal would have created additional exceptions to permit estimation with respect to certain recipient institution fees under proposed (b)(4) and national foreign taxes under proposed (b)(3). The proposed related commentary would have described the particular methods that could be used to estimate under these two methods. As discussed above, under (d), in both cases, the provider would have been required to disclose that the amount was estimated pursuant to (b)(1)(vi) and (vii). Given that the 2013 Final Rule does not require the disclosure of non- covered third-party fees or taxes collected by a person other than the remittance transfer provider (see (b)(1)(vi)), the two proposed estimation methods are now unnecessary. As a result, the proposed changes to the 2012 Final Rule under (b)(3) and (4) are not being adopted nor is the Bureau adopting the related proposed changes to the commentary. See proposed comments 32(b)(3) and (4). Instead, as described below, the Bureau is adopting a new (b)(3) to describe possible reasonable estimation methods that can be used where a remittance transfer provider elects to disclose non-covered third-party fees or taxes collected by a person other than the provider. 32(b)(3) Estimates for Non-Covered Third-Party Fees and Taxes Collected by a Person Other Than the Provider As described above, the Bureau is eliminating the requirement to disclose certain recipient institution fees and taxes collected on the remittance transfer by a person other than the provider and to include such amounts in the amount received, required to be disclosed under (b)(1)(vii) and (b)(2)(i). Nevertheless, the Bureau believes that where the remittance transfer provider knows or can reasonably estimate any applicable noncovered third-party fee or tax collected on the remittance transfer by a person other than the provider and elects to disclose one or both of such amounts, senders are likely to benefit from more accurate and informative disclosures. Consequently, (b)(1)(viii) permits a provider to disclose any applicable non-covered third-party fees or taxes collected on the remittance transfer by a person other than the provider applicable to a remittance transfer in conjunction with the required disclaimers. In order to encourage the optional disclosure of such information, (b)(3) of the 2013 Final Rule permits remittance transfer providers latitude to estimate any applicable noncovered third-party fees or taxes collected on the remittance transfer by a person other than the provider. Such estimates may be based on reasonable sources of information. The Bureau acknowledges that permitting providers to estimate such amounts may result in providers providing disclosures that may not reflect the actual charge by individual recipient institutions or the taxes levied upon such transfers. Nonetheless, the Bureau believes that permitting a reasonable approximation of the amount of non-covered third- VerDate Mar<15> :55 May 21, 2013 Jkt PO Frm Fmt 4701 Sfmt 4700 E:\FR\FM\22MYR2.SGM 22MYR2 party fees and taxes collected on the remittance transfer by persons other than the remittance transfer provider that could be assessed based on reasonable sources would provide senders valuable information about the amount to be received while also allowing the provider sufficient flexibility to disclose such information. New comment 32(b)(3) 1 further notes that reasonable sources of information may include, for example: Information obtained from recent transfers to the same institution or the same country or region; fee schedules from the recipient institution; fee schedules from the recipient institution s competitors; surveys of recipient institution fees in the same country or region as the recipient institution; information provided or surveys of recipient institutions regulators or taxing authorities; commercially or publicly available databases, services or sources; and information or resources developed by international nongovernmental organizations or intergovernmental organizations. The 2013 Final Rule also includes new model forms that provides examples of how such information may be integrated within the disclaimers of (b)(1)(viii). See Model Forms 30(b) (d). Additional Conforming Edits to In addition, because of the changes made to the disclosure requirements under (b)(1)(vi), (b)(2)(ii) and (c)(3)(i) have been amended to conform with the requirements of (b)(1)(vi), as amended, which requires that a party disclose only covered third-party fees. Conforming changes have also been made to comments 32(a)(1) 1, (a)(1) 2.ii, 32(a)(1) 3.ii, and 32(b)(2) 1 so that these comments and related headings, as finalized, use the term covered third-party fees rather than other fees. In (c)(3)(ii), however, the Bureau notes that it has retained a reference to fees imposed by both the intermediary and the final recipient s institution. Although fees imposed by the recipient institution are generally non-covered third-party fees, under (h), certain recipient institution fees may qualify as covered third-party fees if they are imposed by an agent of the provider. See comment 30(h) 2.ii. In addition to the conforming changes related to the disclosure of covered third-party fees pursuant to (b)(1)(vi), references to taxes collected on the remittance transfer by